Co-op Society not exempt as Financial Establishment under KPID Act. Registrar oversight /= state control. Valid proceedings.

The court concluded that the petitioner's Co-operative Society is not excluded from the definition of 'Financial Establishment' under the Karnataka Protection of Interest of Depositors in Financial Establishment Act, 2004. Regulatory oversight by the Registrar of Co-operative Societies does not constitute state control, as the society's management is governed internally. Therefore, the Special Court's proceedings under the KPID Act were deemed valid, leading to the dismissal of the petition and rendering the interim application moot.

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Issues Involved:
1. Applicability of the Karnataka Protection of Interest of Depositors in Financial Establishment Act, 2004 (KPID Act) to the petitioner's Co-operative Society.
2. Definition and interpretation of 'Financial Establishment' under Section 2(4) of the KPID Act.
3. Control of the Co-operative Society by the State Government or Central Government.

Detailed Analysis:

1. Applicability of KPID Act to the Petitioner's Co-operative Society:
The petitioner sought to quash the proceedings pending before the Special Court under the KPID Act, arguing that his Co-operative Society, being controlled by the State, is excluded from the definition of 'Financial Establishment' under Section 2(4) of the Act. The respondent alleged that the petitioner failed to refund deposits and misappropriated funds, leading to the Special Court taking cognizance of the complaint and issuing summons.

2. Definition and Interpretation of 'Financial Establishment':
Section 2(4) of the KPID Act defines 'Financial Establishment' as any person or group accepting deposits but excludes corporations or co-operative societies owned or controlled by the State or Central Government. The petitioner argued that his society, being registered under the Karnataka Co-operative Societies Act, 1959 (KCS Act), and subject to its regulations, should be considered controlled by the State, thus excluded from the KPID Act.

3. Control of the Co-operative Society by the State Government or Central Government:
The court examined whether the petitioner's society is controlled by the State. The petitioner’s counsel cited judgments to support the argument that regulatory oversight by the Registrar of Co-operative Societies constitutes state control. However, the court noted that mere registration and regulatory compliance do not equate to control by the State. The society's management and operations are governed by its own board and bye-laws, not directly by the State.

The court referred to the Supreme Court's observations in Thalappalam Ser. Co-op Bank Ltd. v. State of Kerala, which distinguished between statutory bodies and those governed by statutes. It emphasized that regulatory oversight does not imply deep and pervasive control by the State. Consequently, the petitioner's society, despite being regulated by the KCS Act, is not controlled by the State in a manner that would exclude it from the definition of 'Financial Establishment' under the KPID Act.

Conclusion:
The court concluded that the petitioner's society does not fall under the exclusion provided in Section 2(4) of the KPID Act. The regulatory oversight by the Registrar of Co-operative Societies does not amount to state control. Therefore, the Special Court's cognizance of the complaint under the KPID Act was valid. The petition was dismissed as not fit for admission, and the interim application (IA No. 1 of 2018) was rendered moot.

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