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