Economic Offences Wing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  ORGIN of TNPID Act  
 

        
 
TNPID ACT:-

          The State of Tamil Nadu is the Pioneer in enacting the law titled " THE TAMIL NADU PROTECTION OF INTERESTS OF DEPOSITORS ( IN FINANCIAL ESTABLISHMENTS) ACT - 1997" (Act 33/2003).

The Act provides:-

  • Action against Financial Institutions who failed to return the deposit / interest.
  • Arrest of the accused.
  • The Special Court for TNPID Act constituted help in the speedy trial, attachment and sale of properties.
  •  Distribution of money to the depositors.

         The offence is compoundable and this provision was introduced in Sec. 5A by the Act,  so that the Financial Establishment and the partner will come forward to settle the amount to the depositors speedily. The Amendment in the Act came in to force from 10.11.2003.

SPECIAL ASPECTS OF TNPID ACT

Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act 1997

Section. 2(2) :  Deposit means the deposit of money either lump sum amount or by installment made with the financial establishment for a fixed period, for interest or for return of any kind or any service.

Section. 2(3) :  Financial Establishment means an individual or association of individual, a firm or a company, registered under the Companies Act, 1956.

Section. 3 :  Attachment of properties on default of return of deposits :

         To attach the properties of the Financial  Establishments, which defaults the return of the deposits.  If the value of the properties attached is not sufficient, promoter, partner, director, manager, borrowers or member of the financial establishment can also be attached. 

Section. 4 :  Competent Authority :

            Competent Authority is empowered to attach & sell the properties and disburse the money to the depositors.

Section . 5 : Default in repayment of deposits / interests honouring the commitment :

        10 years Rigorous Imprisonment and fine which may extend to Rs. one lakh and such financial establishment is also liable for fine which may extend to Rs. one lakh.

Section.5A : Compounding the offence :

          Offence punishable under section 5 may, before the institution of the prosecution, be compounding by the competent authority with the permission of the Special Court on payment of the entire amount due to the depositors with or without interest.

Section. 8 :  Attachment of properties of Malafide transferees :

          To attach the properties of malafide transfer where the Financial Establishment transfers its property to a person with intention to deceit the depositors and without proper consideration.

Salient features of the amended TNPID Act-1997

        1.  TNPID Act 1997 was amended on 10.11.2003.

       2.   Bring a company registered under the Companies Act, 1956 and a non-banking financial company within the purview  of the Act.

       3.  Make the non-payment of interest and failure to render service for which deposit has been made, as offences under the Act.

       4.   Attach the properties of the person who has borrowed money from the Financial Establishments and failed to return the money.

        5.  Appoint of more than one competent authority under the Act.

         6.  Constitute Special Courts for different areas and for different cases and to appoint Special Public Prosecutors for each of the Special Courts.

          7.  Specify the time limit within which the Special Court shall pass the final order.

           8.  Compound the offences punishable under the Act and

           9.  to sell the attached properties in public auction and to distribute the sale proceeds among the depositors.

COMPETENT AUTHORITY

          The Additional Commissioner of Land Administration was the only Competent Authority until September 2004. As per G.O.No.1049/2004, Home/Courts-ΙΙA, dated 26.08.04, the DROs of the districts have been notified as the Competent Authorities.

  1. COMPETENT AUTHORITY FOR ATTACHMENT PROCEEDINGS

                  Competent Authority in TNPID Cases is the custodian for the attachment proceedings, takes possession of the Ad-interim attached properties. Get absolute attachment order and distribute the amount realized equally to the depositors after the sale of Property.

  2. COMPETENT AUTHORITY IN NON-TNPID CASES:

                  In Non-TNPID cases – if no Receiver / Official Liquidator / Administrator / Special Officer / Commissioner is appointed the Investigation Officer is to take possession of Property (After Absolute Attachment) and distribute the sale proceeds to the depositors after the conviction of the Criminal Case, as per the court order.

WHO IS AN OFFICIAL LIQUIDATOR?

          Liquidator in the Ministry of Company affairs is appointed by the Hon’ble High Court when a Company files the winding up petition – The Liquidator takes charge of the Assets and Liabilities and disburses the amount to the creditors and claimants as per the orders of the High Court.

ADMINISTRATOR / SPECIAL OFFICER

          Administrator / Special officers may be appointed either by the Dept. of  Company Affairs / Company Law Board or by the Hon’ble High Court. He take over the administration of the Company as per the directions of the Dept. of Company affairs / Company Law Board or Hon’ble High Court to collect money form the borrowers / debtors and distribute the collected amount to the depositors & other creditors

DEBT RECOVERY TRIBUNAL

          DRTs are constituted to help Banks / Financial Institutions for recovery from the defaulters.

OFFICIAL ASSIGNEE

           In cases where Insolvency Petitions are filed by the Accused an official Assignee is appointed by the High Court and he take over the Assets and liabilities of the company, dispose them and distribute pro-rata share as per the directions of the Court.

IN SHORT THE EOW- ΙΙ IS MAINLY RESPONSIBLE FOR THE CRIMINAL PROSECUTION AND TO IDENTIFY & ATTACH THE PROPERTIES FOR THE SETTLEMENT OF THE DEPOSITORS DUES.

REFUND OF MONEY TO DEPOSITORS IS DONE BY EITHER

Competent authority

(or)

Administrator / special officer

(or)

Liquidator

(or)

Official assignee

(or)

Debts recovery tribunal

(or)

State consumer forum

(or)

Any other agency appointed by the court.

Procedure for Identification & Attachment of Property in TNPID Cases

Identification of movable & immovable property (action by EOW ΙΙ)

Proposal for ad-interim attachment sent to government (action by EOW ΙΙ)

Ad-interim G.O. issued by the government for
Attachment of the properties (action by Govt.)

Competent authority to take possession of
Properties once the ad-interim order is issued (action by DRO)

Competent authority to file a petition u/s. Sec 7(7)
             For (O.A) for Absolute attachment  as well as  sale of property in the special court  (action by DRO)

Sale of property can be done, and disbursement of
the sale proceed to the depositors can also be
made-under TNPID act even before the disposal of
The criminal case (action by DRO)

Sale proceeds to be disbursed to the depositors. (action by DRO)

Procedure for the identification & Attachment of property in non-TNPID cases

Identification of property (movables and immovable) (action by EOW II)


Proposal for authorisation G.O. sent to
Government (action by EOW II)

Authorisation G.O issued by the government for
Attachment of the properties (action by government)

I.O. To file petition in the Chief Small Causes Court.
Chennai / Sessions Court for absolute
Attachment (action by EOW ΙΙ)

Court to issue absolute orders for the properties
Attached (action by court)

The I.O to take possession
Of the properties after orders of absolute
Attachment (action by EOW ΙΙ)

After the conviction of the criminal case, the sale of properties is done and the amount realised may be disbursed to the depositors after getting clearance from the respective court (action by EOW ΙΙ)

Sale proceeds disbursed to the depositors. as per the order of the court (action by EOW ΙΙ)

COURT HANDLING THE EOW- ΙΙ CASES

           In some cases the Administrators are appointed by the High Courts & Liquidators by the Department of Company Affairs to take over the assets and liabilities and take action to settle the depositor’s money.

           In case of financial institutions, which had defaulted not only to depositors, but also to other creditors then the claim have to be referred to the Debts Recovery Tribunal. In case any accused declares himself insolvent and files an Insolvency petition and is pending in the High Court, the court appoints an Official Receiver who should administer the properties and other affairs and settle the dues.

SPECIAL PUBLIC PROSECUTORS

           There are two Special Public Prosecutors, appointed by the Government, who conduct the Criminal and Civil Proceedings before the Spl. Court under TNPID Act. One more Special Public Prosecutor, available at the EOW Hqrs. attends to the cases before the CMM and Addi. CMM Courts at Chennai. One Assistant Public Prosecutor Grade -1 in the EOW gives legal opinion for all matters.

TRIAL COURTS

  1. A Special Court has been constituted under TNPID Act at Chennai, coimbatore and Madurai to try the cases registed under TNPID Act.
  2. Chief Metropolitan Magistrate, Addl.CMM, Chennai City try the Headquarter Non-TNPID cases.
  3. Chief Judicial Magistrate Court at Districts try the non-TNPID cases registered in the respective districts.

COURTS WHICH ARE EMPOWERED FOR THE ATTACHMENT OF PROPERTIES

  1. Special TNPID Court at Chennai – For TNPID Cases.
  2. Chief Small Causes Court Chennai For Non-TNPID cases.
  3. District Session Court at Districts For Non-TNPID cases of the respective districts.

POSITION EARLIER

          Before enactment of TNPID Act the offenders of Economic Offences and Financial Frauds were booked under Sections 406, 409, 420, 120(b), 506(¡¡) r/w 34 IPC.

ESTABLISHMENT OF EOW – ΙΙ

           Initially Economic Offences Wing – ΙΙ Units were established in the EOW HQrs at Chennai and all the other 29 Districts in the States, as per the orders of the Government in GO.M.S.No. 1697 HOME (Courts - ΙΙA) Department Dated (24.12.1999) However later, during 2004 due to the less reporting of cases, 13 District Units were wounded up on the orders of the Director General of Police.

           The cases of finance company frauds pending under investigation with the local police including Chennai City Police were  transferred to the Economic Offences Wing (Fls), for investigation. Fresh cases were also registered as numerous complaints started pouring in from the aggrieved depositors from all over the State against finance companies which had defaulted in payment of their matured deposits. The wing also deals with cases relating to Prize Chits, Chit Fund Frauds, Traders cases, cheating cases relating to financial institution etc.

FUNCTIONS OF EOW ΙΙ

  1. To Conduct Petition Enquiries.
  2. To Register the case, Investigate & file the final report in the Court.
  3. To Initiate the Attachment Proceedings of properties for getting G.O.& Liaison with the DRO after the Ad-Interim Orders have been issued till the sale and disbursement of money to the depositors (TNPID Cases)
  4. Initiate proposal for getting order from Government, for attachment & obtain order of Absolute Attachment from Court. However sale of the attached properties can be done only after the conviction of the case. (Non-TNPID Cases).
  5. Liaison with the Administrator / special Officer / Official Assignee / Liquidator / debt Recovery Tribunal & others for the settlement of money to depositors.
  6. Interact with the RBI Officials from time to time with regard to the NBFC Frauds.
  7. Attend the State Level Co-Ordination Meeting (SLCC) conducted by the RBI once in 6 months.
  8. Attend the Regional Economic Intelligence Committee Meeting (REIC) conducted by the Income-Tax Department. Every month.
  9. Interact with the Registrar of Companies with regard to the Cases of Vanishing Companies.
  10. Administration of the Executive Personnel pertaining to the Headquarters.

DUTIES

The EOW - ΙΙ responsible of for the Enforcement of the following Acts:

  1. Tamil Nadu Protection of Interest of Depositors Act, 1997
  2. Indian Penal Code.1860
  3. The Criminal Law Amendment ordinance. 1994
  4. Prize Chits & Money Circulation scheme (Banning) Act, 1972.

ROLE OF EOW- ΙΙ

There are 2 aspects

1. Handling of Criminal cases.       2. Settlement of Dues.

EOW- ΙΙ is exclusively responsible for handling the criminal cases. During the course of investigation, the I.O. has to.

  1. Find out the reasons for Default
  2. Initiate proposal for attaching the Movable & Immovable properties of the Institution, personal properties of the accused and borrowers of the defaulted companies.
  3. Send proposal to the Government for Ad-Interim attachment Government.
  4. Refer the matter to the Competent Authority regarding disposal of properties and settlement of dues.

TYPES OF CASES INVESTIGATED BY EOW- ΙΙ         

DGP Proceedings Rc.No.267733/RA1 (2)/2002 Dt.12.12.2002

 

1.      All cases against Financial Institutions including NBFC’s whether registered       or Not.

 

2.      Offences relating to Traders and involving large scale Frauds/Cheating.

 

3.       Cases relating to Chit Fund Frauds of large scale.

 

4.      Organized Job racket by Travel and other Agencies involving large scale          Frauds.

 

5.      Cases involving large scale Frauds/ Cheating in violations of Prize Chits &      Money Circulation Schemes (Banning) Act 1978.

 

6.      Cases of organized and technically advanced, serious financial frauds of large   scale.

 

7.     Large scale corporate frauds where money  was collected from public as   investment.

 

8.      Other incorporated and unincorporated bodies who collect money in large    scale from public in any form namely promising return of money or materials.

 

9.      Financial frauds involving large scale money laundering.

10.       All other cases referred to EOW by Govt, DGP and endorsed by the court from time to time.

 

NBFCs (NON-BANKING FINANCIAL COMPANIES

Section 45-I  (c) and (f) of RBI Act 1934 defines about non-banking finance     company (NBFC). It is a company incorporated under companies Act-1956 or a corporation (Incorporated by an act of any legislative) or a cooperative society that -

Grants loan and advances

 

Invests in shares, bonds and securities. 

 

Provides finance by means of hire purchase, equipment leasing, bill discounting, hypothecation loans, etc.

conducts insurance business.

 

Conducts Chits

 

Collects money in lump sum or other wise  and awards prizes or gifts to person

 

Receives deposits as its principles business under any scheme or arrangement or    lending in various manners.  

 UNINCORPORATED FINANCIAL ESTABLISHMENTS

           It means an individual or an association of individual or a firm carrying on the business of financial institution as defined in class C of Section 45 of RBI Act if its principle business is that of receiving deposit under any scheme or arrangement or in any other manner or lending in any manner. The unincorporated bodies are not incorporated in Companies Act.

CHIT FUND CASES

                “Chit” means a transaction agreed with a specified number of persons for subscription of a particular amount which is to be collected in installments and given as prize amount by a lot/tender/auction.

Foreman – is the person authorised by the members to conduct the chit.

All chits have to be registered with Registrar of Chits.

Penalty – Section 76 – Imprisonment upto 2 years and fine upto Rs.5,000 or both.

 

     TRADER’S CASES

           All the complaints lodged by and received from the Traders are registered and investigated by the EOW (Fls) units, as per the orders of the Government, communicated to the DGP, Tamil Nadu in Letter No.47586/police.8/2001-1 dt.19.6.2000 and the Circular memorandum issued by the ADGP/EOW in RC.No86/camp/SP.EOW- ΙΙ/2000 dated: 31.7.2000.

RBI TRAINING AND THE STATE LEVEL COORDINATION COMMITTEE MEETING CONDUCTED BY RBI

           Reserve Bank of India is the Regulatory Authority for the non-banking financial companies. RBI and EOW- ΙΙ are conducting training programmers for the EOW officers once in three months for the new incumbents. RBI also conduct the State Level Coordination Committee Meeting once in six months. The EOW- ΙΙ also organizes Training programmers for the investigation Officers every year to fine tune and update the investigation skill of the officers.

Amendment

Abstract

Act-State-Tamil Nadu Protection of Interests of Depositors in Financial establishment) Act,1997 (Tamil Nadu Act 44 of 1997) – Amendment- Tamil Nadu Protection of Interest of Depositors. (in Financial Establishments)Amendment Act, 2008 (TamilNadu Act 18 of 2008) – date of coming into force.

HOME (POLICE XIX ) DEPARTMENT

G.O.M.s.No.840                                                                                Dated :24.07.2008
                                                                                                            Aadi-9th
                                                                                                            Thiruvalluvar Aandu,2039.

ORDER:

            The Following Notification will be published in the Tamil Nadu Government Gazette Extraordinary dated the 24th July 2008.

NOTIFICATION

            In exercise of the powers conferred by sub-section (2) of section 1 of the Tamil Nadu Protection of Interest of Depositors (in Financial Establishments) Amendment Act, 2008 (Tamil Nadu Act 18 of 20087), The Government of Tamil Nadu herby appoints the 24th day of July 2008 as the date on which the said At shall come into force.

(BY ORDERS OF THE GOVERNOR)

                                                                                                        JOTHIJAGARAJAN
                                                                    SECRETARY TO GOVERNMENT(i/c)


TAMIL NADU GOVERNMENT GAZETTE EXTRORDINRY

The following Act of the Tamil Nadu Legislative Assembly received the assent of the Governor on the 22nd May 2008 and is hereby published for general information:-

 

Act No.18 Of 2008

An Act further to amend the Tamil Nadu Protection of Interest of Depositors (In Financial Establishment) Act, 1997.

 

BE it enacted by the Legislative Assembly of the State of Tamil Nadu in the   Fifty-ninth year the Republic of India as follows:-

 

Short title and commencement

1. (1) This Act may be called the Tamil Nadu Protection of Interest of Depositors (in Financial Establishment) Amendment Act, 2008.

    (2) It shall come into force on such date as the State Government may be notification appoint.

Tamil Nadu Act 44 of 19

Amendment of Section 4

2. In Section 4 of the Tamil Nadu Protection of Interests of Depositors ( in Financial Tamil Nadu Establishments) Act, 1997 (hereinafter referred to as the principal Act), for Act sub-section (3), the following sub-section shall be substituted, namely:- 

 

 

 “(3) Upon receipt of the orders of the Government ;under Section 3, the competent authority shall apply within thirty days to the Special Court constituted under this Act of making the ad-interim order of attachment absolute and for a direction to sell the property so attached by public auction and realize the sale proceeds”

 

Amendment of Section 7

3. In Section 7 of the principle Act,-

    (i) for sub-section (1), the following sub-section shall be substituted, namely:-

      “(1) Upon receipt of an application under Section 4, the Special Court shall issue to the Financial Establishment or to any other person whose property is attached by the Government under Section 3, a notice accompanied by the application and affidavits and of the evidence, if any, recorded, calling upon him to sow cause on a date to be specified in the notice why the of order of attachment should not be made absolute and the property so attached be sold in public auction.

   (ii) for sub-section (4), the following sub-section shall be substituted, namely:-

         “(4) If no cause is shown and no objection are made on or before the specified date, the Special Court shall forthwith pass an order making the ad-interim order of attachment absolute and direct the competent authority to sell the property so attached by public auction and realize the sale proceeds.”

    (iii) for sub-section (6), the following sub-section shall be substituted, namely:-

      “(6) After investigation under sub-section (50, the Special Court shall pass an order, within a period of one hundred and eighty days from the date of receipt of an application under sub-section (3) of Section 4 either –making the ad-interim order of attachment absolute or varying it by releasing a portion of the property from attachment or canceling the ad-interim order of attachment and then direct the competent authority to sell the property so attached by public auction and realize the sale proceeds.

      Provided that the 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 re-payment to the depositors of such Financial Establishment.”

    (iv) sub-section (70 shall be omitted.
 
     (v) in sub-section (8), the expression “under sub-section (7)” shall be omitted.

4.  In Section 9 of the principle Act, for the expression “passing the order of Amendment of attachment”, the expression “passing the order under sub-section (6) of Section 7” shall be substituted.      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amendment of Section 9

(By Order of the Governor)

 

S.DHEENADHAYALAN,
Secretary to Government,
Law Department.