The Kerala Protection of Interests of Depositors in Financial Establishments Act, 2013

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Government of Kerala 
Regn. No. KERBIL/20!2/45073 
dated 5-9-2012 with RN! 
Reg. No. KLrfV(N)/634/2015-17 
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Vol. IV 
2015 
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KERALA GAZETTE 
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PUBLISHED BY AUTHORITY 
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Thiruvananthapuram. 28th Vrischikam !!91 No. 
Monday 1937 «llilL<Ilrul<lCll><Ua 23 
23rd Agrahayana 193 7 
GOVERNMENT OF KERALA 
Law (Legislation-A) Department 
NOTIFICATION 
}2811 
No. 11750/Leg. A2/2012/Law. 28th November. 2015 
Dated, Thiruvananthapuram, 12th Vrischikam, 1191 
7th Agrahayana, 1937. 
In pursuance of clause (3) of Article 348 of the Constitution of India 
the Governor is pleased to authorise the publication in the Gazette of the 
following translation in the English language of the Kerala Protection of 
Interests of Depositors in Financial Establishments Act, 2013 (7 of 2015). 
By order of the Governor, 
D. SAJU, 
33/472112015/S-22 Special Secretary (Law). 
• 
2 
[Translation in English of "2013-G>e.J C:dM)~ wmcB>om~ <TUOOnJ<n6lll3~16le.J 
mla:cfh'l1rudl>m66>5 <moe:irum~ <TUo(l)cfh'I16JT) ~db'g" published under the 
authority of the Governor.) 
ACT 7 OF 2015 
THE KERALA PROTECTION OF INTERESTS OF 
DEPOSITORS IN FINANCIAL ESTABLISHMENTS ACT, 2013 
AN 
ACT 
to provide for the protection of interests of depositors in financial 
establishments in Kerala and for matters connected therewith or 
incidental thereto. 
Preamble.-WHEREAS, it is expedient to provide for the protection of 
interests of depositors in fmancial establishments in Kerala and for matters 
connected therewith or incidental thereto; 
BE it enacted in the Sixty-fourth Year of the Republic of India as 
follows:-
!. Short title and commencement.-(!) This Act may be called the 
Kerala Protection of Interests of Depositors in Financial Establishments 
Act, 2013. 
(2) It shall come into force at once. 
2. Definitions.-In this Act, unless the context otherwise requires,---' 
(a) "competent authority" means the authority appointed under 
section 4 of this Act; 
(b) "deposit" means the deposit of money either in lump sum or 
by instalments made in a financial establishment for a fixed period, for 
interest or for properties or for return in any kind or for any service; 
(c) "financial establishment" means a person, an association of 
persons, a partnership firm or a company registered under the Companies 
Act, 1956 (Central Act I of 1956) carrying on the business of receiving 
deposits under any scheme or arrangement or in any other manner but 
does not include a corporation or a co-operative society under the 
ownership or control of any State Government or of the Central 
Government or a banking company as defined in clause (c) of section 5 
of the Banking Regulation Act. F' "' '' · 
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(d) "Government" means the Government of Kerala; 
(e) "property" includes movable and immovable properties; 
(t) "Special Court" means a special court constituted under section 
7 of this Act. 
3. Attachment of property on default of return of deposits.­
Notwithstanding anything contained in any other law for the time being in 
force,-
(a) where complaints are received by the Government from a 
number of depositors, that any fmancial establishment defaults the return 
of deposits after maturity, or fails to pay interest on deposit or where the 
- deposit is for providing service or properties, fails to provide such service 
or properties, for which deposit has been made; or 
(b) where the Government have reason to believe that any 
fmancial establishment is acting with an intention to defraud the depositors; 
and if the Government are satisfied that such financial establishment is not 
likely to return the deposits or to make payment of interest or to provide 
the service or to provide properties, the Govenunent may, in order to 
protect the interests of the depositors of such financial establishment, pass 
an ad-interim order, attaching any property purchased in the name of the 
financial establishment or in the name of any other person or establishment 
or the money or property alleged to have been procured either in the 
name of the financial establishment or in the name of any other person 
from and out of the deposits collected by the financial establishment, if it 
reasonably feels that such money or other property is not available for 
attachment or not sufficient for repayment of the deposits, the property of 
the said financial establishment or of the promoter, partner, director, 
manager or member of the said financial establishment or a person who 
has borrowed money from the fmancial establishment and defaulted, to the 
extent of his default or, such other properties of that person in 
whose name properties were purchased from and out of the deposits 
collected by the financial e'stablishment, as the Government may. 
think fit, and transfer the control over the said money or property to the 
competent authority. 
4 
4. Competent authority.--( 1) The Government may, by notification in 
the Gazette, appoint competent authorities for such areas or such cases as 
may. be specified therein, to exercise control over the money and 
properties attached under section 3. 
(2) The competent authority shall have such other powers, as may 
be necessary, for carrying out the purposes of this Act. 
(3) The competent authority shall, within thirty days from the date 
of receipt of the order of the Government under section 3, apply before 
the Special Court for making the ad-interim order of attachment absolute. 
(4) An application under sub-section (3) shall be accompanied by 
one or more affidavits, stating that financial establishment has committed 
default or grounds identified which are likely to defraud depositors as 
stated in section 3, the details of money or value of other property 
believed to have been procured by means of the deposit, and the details, 
if any, of persons in whose name such property is believed to have been 
invested or purchased out of the deposits and the details of the properties 
attached under section 3. 
(5) The competent authority shall make an application before the 
court having jurisdiction to try sin1ilar cases or deal with the subject matter 
pertaining to money or property belonging to a financial establishment or 
any person specified in section 3 situated within the territorial jurisdiction of 
that court for appropriate orders. 
(6) For. the purpose of crediting and dealing with the money 
realised by the competent authority, it shall open an account in any 
scheduled commercial bank. 
5. Default in repayment of deposits and interests honouring the 
commitment.-Notwithstanding anything contained in sections ·3 and 4, 
where any financial establishment defaults the return of the deposit or 
defaults the payment of interest on the deposit, or where the deposit is for 
providing service or properties, fails to provide such service or properties 
for which the deposit has been made, every person responsible for the 
management of the affairs of the financial establishment shall, on 
conviction, be punished with imprisonment for a term which' may extend to 
ten years and with fine which may extend to one lakh rupees and such 
financial establishment is also liable for fine which may extend to one 
lakh rupees. 
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6. Compounding of offence.-An offence punishable under 
section 5 may, before institution of the prosecution, be compounded by the 
competent authority or after the institution of the prosecution, be 
compounded 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. 
(2) Where an offence has been compounded under 
sub-section (I), no proceeding or further proceeding, as the case may be, 
shall be taken or continued against the offender, in respect of the offence 
so compounded and the offender, if in custody, shall be discharged and 
released forthwith. 
7. Special Court.--(!) For the purpose of this Act, the Government 
may, with the concurrence of the Chief Justice of the High Court, by 
notification in the Gazette, for such area or areas or such case or cases 
as may be specified therein, constitute one or more Special Courts with a 
judge in the cadre of a District and Sessions Judge. 
(2) No court including the court constituted under the In~olvency 
Act, 1955 (2 of 1956), other than the Special Court shall have jurisdiction 
in respect of any matter to which the provisions of this Act apply. 
(3) Any case pending in any other court to which the provisions of 
this Act apply shall, on the date of constitution of the Special Court, stand 
transferred to it. 
(4) When trying any case, the Special Court may also try any 
offence, other than an offence specified in section 5, with which the 
accused may, under the Code of Criminal Procedure, 1973 (Central Act 2 
of 1974), be charged, with the same trial. 
8. Powers of the Special Court regarding attachment, sale, 
realisation and distribution.-(!) In the case of an application received 
under sub-section (3) of section 4, the. Special Court shall issue to the 
f'mancial establishment or to any other person whose property is attached 
by the Government urrder section 3, a notice accompanied by copy of the 
application, affidavit of the evidence, if any, recorded, calling upon him to 
appear on a date to be specified in the notice and to show cause, if any 
why the order of attachment should not be made absolute. 
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(2) The Special Court shall also issue such notice as stated in 
sub-section ( 1 ), to all other persons represented to it as having or being 
likely to claim, any right, interest or title in the property of the financial 
establishment attached under section 3 or to the property of the person to 
whom the notke is issued, calling upon such person to appear on the same 
date as that specified in the notice and make objection, if he so desires, 
against making the ad-interim order of attachment of the property or any 
portion thereof absolute, on the ground that he has an interest in such 
property or portion thereof. 
(3) Any person making claim or interest in the property attached 
or any portion thereof may, notwithstanding that no notice has been 
served upon him under this section, make an objection as specified in 
sub-section (2) to the Special Court and before an order is passed under 
sub-section (4) or sub-section (6). 
(4) If no cause i~ shown or no objection is made by any 
person on or before the specified date, the Special Court shall forthwith 
pa~s an order making the ad-interim order of attachment by the 
Government under section 3 absolute. 
(5) If cause is shown or objection is made by any person 
under sub-sections (2) and (3), the Special Court shall proceed to 
investigate the same, and in so doing, as regards the examinations of the 
parties and in all other respects, the Special Court shall, subject to the 
provisions of this Act, follow the procedure and exercise all the powers of 
a court while trying a suit under the Code of Civil Procedure, 1908 
(Central Act V of 1908) and may require any person making an objection 
to adduce evidence to show that on the date of attachment under 
section 3, he had right or interest in the property attached. 
(6) After investigation under sub-section (5), 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 
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: 
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Provided that the Special Court shall not release from· attachment 
of the said property unless it is satisfied that the value or amount of the 
property attached is sufficient to repay the amount to the depositors of 
Financial Establishment, eventhc_>.ugh ·it is satisfied th~t the Financial 
Establishment or the person referred to in sub-section ( 1) has any claim or 
interest in the property. 
(7) Where the ad-interim order of attachment is made absolute, the 
competent authority shall make an application before the Special Court to 
sell the properties attached, by public auction and to realise the sale 
proceeds and the Special Court shall issue necessary orders upon it. 
(8) · The Special Court shall, on an application by the competent 
authority, pass such order or issue such direction as may be necessary for 
the equitable distribution among the depositors, of the money realised by 
attachment or by the sale under sub-section (7). 
9. Attachment of property of mala fide transferees.­
(!) Where the -.:alue of the assets available for attachment of a financial 
establishment or any person referred to in section 3 are found to be less 
. than the amount or value which is required to be repaid by such fmancial 
establishment to the depositors and where the Special Court is satisfied by 
affidavit or otherwise that there is reasonable cause for believing that the 
said fmancial establishment or person has transferred, whether before the 
commencement of this Act or after that, any of the property otherwise 
than in good faith and for consideration, the Special Court may, by notice, 
require any establishment to which or person to whom such property, 
was transferred whether the property was received directly or not from 
the financial establishment or person, to appear on a date to be specified 
in the notice and show cause why so much of the property of the 
establishment or of the person, as is equivalent to the market value of the 
property got transferred, should not be attached. 
(2) Where the establishment or person who got transfer as 
stated in sub-section (I) does not appear and show cause on the specified 
date, or where after the investigation complying the procedure provided in 
sub-section (5) of section 8, the Special Court is satisfied that the transfer 
of the property to the establishment or person was not in good faith and 
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f~r consideration, the Special Court shall order the attachment of so much 
of the property of the establishment or person who received the property, 
as in the opinion of the Special Court equivalent to the market value of 
the property transferred. 
10. Security in lieu of attachment.- Where the properties of any 
financial establishment or person has been or is about to be attached 
under this Act, such establishment or person may, at any time, apply to 
the Special Court for permission to give security in lieu of such 
attachment and where the security offered and given is in the opinion of 
the Special Court, satisfactory and sufficient, it may refrain from passing 
the order of attachment or cancel the ad-interim order of attachment, 
as the case may be. 
11. Administration of property attached.- The Special Court may, 
on the application of any person interested in any property attached under 
this Act, and after giving the competent authority an opportunity of being 
heard, make such orders as the Special Court considers just and 
reasonable for,-
(a) providing from such of the property attached as the applicant 
claims an interest in such sums as may be reasonably necessary for the 
maintenance of the applicant and of his family, and for expenses 
connected with the defence of the applicant where criminal proceedings 
have been instituted against him in the Special Court under section 5; 
(b) safeguarding, so far as may be practicable, the interest of any 
business affected by the attachment and in particular in the interest of any 
partners' in such business. 
12. Appeal.-Any person including the competent authority. if ' . 
aggrieved by an order of the Special Court, may appeal before the High 
' Court. within thirty days from the date of order. 
13. Special Public Prosecutor.- The Government shall, by 
notification in the Gazette, appoint one or more advocates of not Jess than 
ten years standing, as a Special Public Prosecutor for each of the Special 
Court for the purpose of conducting the cases in the Special Court. 
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14. Procedure and powers of Special Court while trying 
offenses.-c(l) The Special Court shall have the power to take cognizance 
of the offenses under this act directly without being committed to it for 
trial from the subordinate courts and accordingly in trying the accused 
person, shall follow all the procedures prescribed in the Code of Criminal 
Procedure, 1973 (Central Act 2 of 1974) for the trial of warrant cases by 
Magistrates. 
(2) The provisions 6f the Code of Criminal Procedure, 1973 
(Central Act 2 of 1974) shall, so far as may be, apply to the proceedings 
before a Special Court and for the purpose of the said provisions, the 
Special Court may exercise the powers of a Judicial Magistrate. 
15. Overriding effect of the Act over other Laws.-Save as 
otherwise provided in this Act, 'the provisions of this Act shall have 
overriding effect notwithstanding anything inconsistent therewith contained 
in any other law for the time being in force or any custom or usage or 
any instrument having effect by virtue of·any such law. 
16. Power to make rules.-c(l) The Government may, by notification 
in the Gazette, make rules either prospectively or retrospectively, for 
carrying out the provisions of this Aci. 
(2) Every rule made under this Act shall be laid, as soon as may 
be after it is made before the Legislative Assembly while it is in session 
for a total period of fourteen days which may be comp.rised in one session 
or in two successive sessions, and if, before the expiry of the session in 
which it is so laid or the session immediately following, the Legislative 
Assembly. makes any modifi"ation in the rules or decides that the rule 
should not be made, the rule shall, thereafter, have effect only in such 
modified form or be of no effect, as the case may be, so however, that 
any such modification or annulment shall be without prejudice to the 
validity of anything previously done under that rule. • 
PRINTED AND PUBLISHED BY THE SUPERINTENDENT OF GOVERNMENT PRESSES 
·\T THE GOVERNME}.;T CENTRAL PRESS. THIRUVANANTIIAPllRAT . :!015 

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