In a Criminal Original Petition arising from the Rs. 220 crore Thiripura Chits depositor fraud, the Madras High Court has permitted the Liquidator appointed under the IBC to pursue recovery of receivables under the Chit Funds Act, 1982, while reaffirming the primacy of the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997 (TNPID Act) over the IBC in such matters. On the interplay between the IBC and the TNPID Act, the Court noted that the Division Bench had already upheld the actions of the Economic Offences Wing, and the judgments rendered inter-parties would bind all concerned, permitting the Economic Offences Wing to proceed further in accordance with the provisions of the TNPID Act.
The Court held that the Liquidator, having stepped into the shoes of the Board of Directors under the IBC, has an independent and legitimate forum under the Chit Funds Act, 1982, to initiate proceedings for recovery of receivables, and it is his statutory duty to take expeditious steps in that direction. The Court clarified that the Liquidator’s recovery efforts are subject to the condition that if any amount recovered constitutes proceeds of crime or belongs to the accused company or its directors, the Economic Offences Wing remains entitled to take appropriate action in accordance with law, thereby preserving the parallel criminal proceedings.
Regarding the collection of receivables, a Single Judge Bench of Justice D. Bharatha Chakravarthy observed that the Liquidator has an appropriate forum under the Chit Funds Act to initiate proceedings and recover amounts due. However, this was subject to the condition that if any amount recovered constitutes proceeds of crime or belongs to the accused company or its directors, the Economic Offences Wing would be entitled to take appropriate action in accordance with law. The Court observed that there is nothing illegal in the Liquidator taking expeditious steps to collect receivables, and in fact, it is the statutory duty of the Liquidator, when appointed under the IBC, to take appropriate steps to recover amounts due to the company.
On the prayer for furnishing copies of materials, the Court held that since the entire materials pertaining to the company had been seized by the Economic Offences Wing in the course of investigation, one complete set of copies may be furnished to the Liquidator, and if originals of any particular documents were required at a later stage, the Liquidator may seek appropriate permission from the Special Court or approach the appropriate fora.
Briefly, the criminal original petition was filed by P.V. Krishnaprasad, one of the Directors of Thiripura Chits Private Limited, seeking a direction to the Economic Offences Wing-II (EOW), Guindy, Chennai, to hand over all materials, statements, information, and documents pertaining to the company to the Liquidator appointed under the Insolvency and Bankruptcy Code, 2016 (IBC), and further to direct the Liquidator to initiate action under the Chit Funds Act, 1982, for recovery of receivables.
The genesis of the matter lies in a crime registered against Thiripura Chits Private Limited and its Directors, including the petitioner, for offences under Sections 420, 406 and 120B of the Indian Penal Code and Section 5 of the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997 (TNPID Act). Pursuant to multiple complaints lodged in different districts, several cases were registered across various Economic Offences Wing jurisdictions, including Kancheepuram, Vellore, Villupuram, and Karur. Investigation revealed that the company had collected approximately Rs. 220.15 crores from 9,927 depositors and had failed to repay the deposited amounts, thereby cheating the depositors.
By an order, all cases were transferred to the Economic Offences Wing, Chennai, for consolidated investigation and filing of a final report before the Special Court at Chennai. A consolidated statement filed in connected writ proceedings disclosed that out of 9,927 complaints received across 13 districts, 6,794 had been examined, with an outstanding amount of Rs. 220.14 crores, and 3,133 witnesses were yet to be examined.
While the properties of the company were attached by the authorities, corporate insolvency proceedings were simultaneously initiated against the same entity before the National Company Law Tribunal (NCLT). By an order, the NCLT nullified the attachment made by the Economic Offences Wing, holding that the provisions of the IBC would prevail over the TNPID Act.
