TaxTMI 
TaxTMI 
2026 (3) TMI 763
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....al Case No. 1/2014, seeking quashing and setting aside of said Order and to allow the Application (Exh. 11) thereby staying the proceedings in MA/151/2020. 2) Heard Mr. Bhanushali, learned Advocate for the Appellant, Ms. Patil, learned Special PP and Smt. Shinde, learned APP for the Respondent No. 1, State and Mr. Lakhawat, learned Advocate for Respondent No. 2 ("NSEL"). 3) Facts giving rise to this Appeal are as under:- 3.1) The said MPID Case has been filed for the offences under Section 3 of MPID Act and Section 120B read with Sections 406, 409, 420, 467 and 477A of IPC. Therein Appellant and Smt. Kanta Gupta are being prosecuted as Accused Nos.129 and 130. Smt. Kanta Gupta has been a sole proprietor of the Appellant. Respondent No. 1 has filed said MA/151/2020 under Section 8 of MPID Act, arraigning M/s. PD Agro Processors Pvt. Ltd. ("M/s. PD Agro", for short) and the Appellant as Respondent Nos.1 and 2, respectively. Therein, it has been contended that the forensic audit report of M/s. PD Agro has revealed that M/s. PD Agro has received the investors' money via NSEL and owes its liability to the tune of Rs. 680.29 Crores. M/s. PD Agro became member of NSEL on 26th Sep....
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.... of the MPID Act is 'debt'. There is no material on record to show that there was such a 'debt' which has been sought to be secured by the State with the help of the attachment under Section 4(1). There existed no relationship as 'debtorcreditor' between Smt. Kanta Gupta and Respondent No. 1. The property of the Appellant has not been attached by Respondent No. 1 to secure any debt whatsoever but to protect the interest of the depositors who have lost their monies. That M/s. PD Agro is one of the defaulters on the exchange platform of the NSEL and owes it liability to the tune of Rs.673.85 crores. The NSEL has obtained a decree of INR 633,66,98,350.40 along with interest @ 9% p.a. Execution proceedings has been initiated to execute the said decree. M/s. PD Agro has been declared as Financial Establishment under the MPID Act. That, Smt. Kanta Gupta, sole proprietor of the Appellant, has been a family member of the Director of M/s. PD Agro. The relevant Forensic Audit Report revealed the money trail of about Rs.13.60 Crores from M/s. PD Agro to the Appellant. Said direct money trail of deposits from M/s. PD Agro to the Appellant, per se, liable to be attached under Section 4 (1) a....
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....r. Bhanusahli, the Application at Exh. 11 was fit to be allowed. 9) In reply, Ms. Patil, the learned Special PP appearing for Respondent No. 1 and Mr. Lakhawat appearing for the Respondent No. 2 submitted that, the Appellant has not denied the money trail deposits of Rs.13.60 Crores which was part of the investors' money. The amount invested by the investors cannot be termed as debt because there was no debtor-creditor relationship between the Appellant and the State. The MPID Act and the IBC work in different spheres and the two do not overlap. The attachment is carried out in exercise of specific power granted by a special statute i.e. MPID Act which has been enacted as a public law remedy to protect the interest of innocent depositors from the evil of fraud. The proceedings under Section 8 are quasi-civil and quasi-criminal in nature and arises out of a crime. Mr. Lakhawat submitted that, the said proceedings are intended to benefit the investors and individual Directors cannot be exempted or allowed to take shelter of IBC. Therefore, question of attracting the provisions of Section 96 does not arise in this case. In the backdrop, rejection of the Application (Exh. 11) by the....
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....bers of Respondent No. 2. Subsequently Respondent No. 2 did not stick to that settlement schedule rather defaulted in all the pay outs. Consequently, FIR bearing C.R. No. 216/2013 came to be registered at MRA Marg Police Station, Mumbai. Investigation revealed that, the mode of transaction allowed by the Government of India which was to be followed by Respondent No. 2, was ignored and Respondent No. 2 had promised attractive returns to persons who had traded on Respondent No. 2 platform. The Forensic Audit Report revealed mala fide transfer of crores of rupees by the member companies which they had received through Respondent No. 2. Therefore, Respondent No. 1 was constrained to file the MA/151/2020 invoking Section 8 of MPID Act. 11) With the help of Section 94 of IBC Code, a debtor at default, personally or through resolution professional, may apply to the Adjudicating Authority for initiating the insolvency resolution process. With the aid of Section 95 of the IBC, the creditor may apply either by himself or jointly with other creditors through the resolution professional to the Adjudicating Authority for initiating an insolvency resolution process. In this factual matrix, th....
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....to cases of repugnancy where the alleged inconsistency arises due to an overlap between subjects falling under List II and those contained in List I or List III. In such circumstances, the validity of the State law must be determined with reference to Article 246 and in view of the non-obstante clause in Article 246(1), read with the opening words "subject to" in Article 246(3). The State Legislature cannot enact a law in a field reserved for Parliament. If such an overlap occurs, the State law would be ultra vires, not on account of repugnancy, but for want of legislative competence. It is true that the words "a law made by Parliament which Parliament is competent to enact" in Article 254(1) may, if read alone, suggest that repugnancy between a State law and a Parliamentary law could arise even outside the Concurrent List, since Parliament is competent to legislate on matters in both List I and List III. However, Article 254(1) must be read as a whole and in conjunction with clause (2), which specifically refers to repugnancy in respect of matters in the Concurrent List. Clause (2) thus guides the interpretation of clause (1), making it clear that the repugnancy contemplated is....
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.... of IBC makes it clear that Section 14 provides for a moratorium for corporate debtor whereas Section 96 deals with an interim-moratorium in relation to all the debts. Section 96(i)(b) clearly states that the moratorium provided in Section 96 applies to any legal action or proceeding pending in respect of any debt of the individuals. 16) In the present case, the record does not indicate that the Appellant or Smt. Kanta Gupta had obtained certain money as debt from Respondent No. 1. Therefore, it cannot be maintained that there was 'debtor-creditor' relationship between the Appellant and Respondent No. 1. On the contrary, the proceedings in MA/151/2020 under Section 8 of the MPID Act have been intended for attachment of property equivalent to the proper value of the property transferred malafidely, not in good faith or for consideration. Said transaction was and is tainted with a crime. Because, as rightly observed by the learned trial Court, the depositors were induced to trade on the said exchange platform alluring them of handsome returns by 25 trading members of Respondent No. 2 including M/s. PD Agro. The said commitments were not fulfilled by Respondent No. 2, thus leading ....
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....itigation for the last ten years against persons/companies like the Appellant who are making every effort to frustrate the said proceedings. Such investors cannot be made to run from pillar to post to redress their grievances. The provisions of IBC cannot be stretched to protect persons who are charged of committing offences of defrauding the investors. Therefore, the learned trial Court was persuaded to reject the Application at Exh. 11. Which, according to us is completely lawful. 19) Controversy similar to this Petition had arisen before the said Supreme Court Committee. While dealing with the issues, reference was made to the following observations of the Hon'ble Supreme Court in the decision Biswanath Bhattacharya v. Union of India & Ors., reported in (2014) 4 SCC 392 : "39. If a subject acquires property by means which are not legally approved, the sovereign would be perfectly justified to deprive such persons of the enjoyment of such ill-gotten wealth. There is a public interest in ensuring that persons who cannot establish that they have legitimate sources to acquire the assets held by them do not enjoy such wealth. Such a deprivation, in our opinion, would cert....
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....its from public, mostly middle class and poor on the promises of unprecedented high attractive interest rates of interest or rewards and without any obligation to refund the deposit to the investors on maturity or without any provision for ensuring rendering of the services in kind in return, as assured. Many of these financial establishments have defaulted to return the deposits to public. As such deposits run into crores of rupees, it has resulted in great public resentment and uproar, creating law and order problem in the State of Maharashtra, especially in the city like Mumbai which is treated as the financial capital of India. It is, therefore, expedient to a make a suitable legislation in the public interest to curb the unscrupulous activities of such financial establishments in the State of Maharashtra." 21.1) In K.K. Baskaran (supra) in paragraph 2, the Hon'ble Supreme Court has observed that "Financial swindling and duping of gullible investors/depositors is not unique to India. It has been referred to in Charles Dicken's novel 'Little Dorrit', in which Mr. Merdle sets up a Ponzi scheme resulting in loss of the savings of thousands of depositors including the Dorrits an....