Depositor's Apprehension Of Recovery Can't Justify Impleadment In Creditor's Writ: Madras High Court

The Madras High Court on 8 October held that a depositor's apprehension that proceedings concerning mortgaged properties may affect his eventual recovery cannot, by itself, justify his impleadment in a writ petition filed by a secured creditor.

Justice K. Govindarajan Thilakavadi made the observation while dismissing K. Karunanithi's application to join a writ petition filed by Axis Bank challenging proceedings under the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997, insofar as they concerned the mortgaged properties. The Bench held:

“The apprehension expressed by the proposed petitioner that an order in the main writ petition may affect the eventual recovery of the amount due to him as a depositor cannot, by itself, be a ground for impleading him as a party. The question of priority between the secured creditor and the depositors, if any, can be considered in appropriate proceedings in accordance with law.”

Axis Bank filed the writ petition claiming rights over the mortgaged properties and challenging proceedings under the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997, insofar as they concerned those properties.

Karunanithi sought impleadment, stating that he, along with his wife and daughter, had deposited Rs. 49 lakh with the financial establishment. He argued that over 2,645 depositors had invested money in the establishment and that orders concerning the attachment, sale or distribution of its assets could affect his recovery.

The Bank opposed the application, contending that Karunanithi had no legally enforceable interest in the mortgaged properties and had produced no material substantiating his alleged deposit.

Rejecting the application, the Court held that Axis Bank's writ petition concerned proceedings against the mortgaged properties, whereas Karunanithi's claim lay against the financial establishment itself. It observed that his status as a depositor did not give him an independent right over the properties. It stated:

“The proposed petitioner, being merely a depositor, does not claim any independent interest over the said properties. His claim, if any, is against the Financial Establishment and not against the mortgaged properties as such”.

Further, the Bench clarified that Karunanithi could pursue other legal remedies to recover his alleged deposits and participate in statutory proceedings concerning the distribution of assets, subject to orders passed by the competent authority or Court.

Accordingly, the High Court dismissed the application.

For Petitioner(s): Advocate M.Abinanda

For Respondent: Advocate S.Sarvagan Prabhu