TaxTMI 
TaxTMI 
2026 (5) TMI 972
X X X X Extracts X X X X
X X X X Extracts X X X X
....(c) of the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 ["MPID Act".]. 3. The facts in the backdrop may be outlined. Appellant Nos. 1 to 5 are the members of a family whereas appellant Nos.6 and 7 are two Companies. As stated by the appellants, somewhere in the year 2016, respondent No. 2 approached them through one Mr. Vedant Prakash Agrawal and induced them to invest amounts for setting up a resort at Tadoba, Maharashtra, promising that, in return, the appellants would get interest at the rate of 24% per annum payable quarterly in advance. Guided by the representations and assurances, the appellants invested total amount of Rs. 2.51 crore by paying such amount through cheques or bank transfer in favour of respondent Nos. 2 to 6. 3.1 The details of the amount paid by the appellants are as follows: (i) Appellant Nos. 6 and 7 paid Rs. 25,00,000/- each in favour of respondent Nos. 5 and 6 (ii) Appellant No. 1 advanced Rs. 95,00,000/- Rs. 45,00,000/- and Rs. 30,00,000/- to respondent Nos. 2, 4 and 3 respectively (iii) Appellant No. 2 paid Rs. 10,00,000/- in favour of respondent No. 4 (iv) Appellant N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2022, directed the Deputy Commissioner of Police, Economic Offence Wing, Civil Lines, Nagpur to register the offence, which order, however, came to be challenged by respondent Nos. 2 to 6 by filing Criminal Revision Application No. 35 of 2022. The said Criminal Revision Application No. 35 of 2022 was allowed by learned Additional Sessions Judge, Nagpur by order dated 04.03.2022 taking a view that no cognizable offence was disclosed from the allegations. 3.6 Aggrieved, the appellants filed Criminal Application (APL) No. 404 of 2022 before the High Court, however, the High Court dismissed the same as per order dated 05.04.2022, reasoning that payment of interest at the rate of 24% per annum on quarterly basis was indicative that the transaction was a "loan transaction", and was of civil nature. 3.7 The appellants, having exhausted themselves in all the aforementioned litigation, finally filed a complaint on 20.10.2022 before the District Collector, Nagpur and the Principal Secretary Special (Home Department), Government of Maharashtra under the MPID Act against respondent Nos. 2 to 6. On 09.03.2023, the Economic Offence Wing submitted a report expressing that no cognizable offe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncial establishment" is liable where it has fraudulently defaulted in repayment of a "deposit" along with any other promised benefit. It was submitted that the expression "fraudulent default" contemplated a default with an intention of causing wrongful gain to one person or wrongful loss to another person. 4.1.1 Assailing the reasoning supplied in the impugned judgment by the High Court, it was submitted on behalf of the appellants that the other proceedings taken out by the appellants under Section 156(3), Cr.PC for the offences under Sections 420, 409 and 405 read with Section 34, IPC were different proceedings and cannot operate adverse to the claim of the appellants under the MPID Act. 4.2 On the other hand, learned counsel Mr. Samrat Krishnarao Shinde assisted by advocate on record Mr. Rameshwar Prasad Goyal for the respondents raised the following submissions: (i) The appellants have indulged in abuse of process of law inasmuch as the dispute is purely a civil dispute relating to repayment of loan given by appellant No. 2, which was a transaction rooted on friendly terms with respondent No. 2. A dispute regarding repayment of money given as loan is of civil nat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....loating any scheme nor they had invited deposits from the public at large, in which circumstance, only the provisions of the MPID Act could apply. 5. The MPID Act, which received the assent of the President on 20th January 2000 and published in the Maharashtra Government Gazette, Part IV, dated 21st January 2000, was enacted with a view to protect the interests of depositors in the financial establishments and the matters relating thereto. At the time of introduction of the Bill in the Legislature, the Statement of Objects and Reasons mentioned that the Statute was designed to protect the public from the increasing menace of Financial Establishments which, very often, grab money from the public in the form of deposits. 5.1 Noticing at the outset the purpose and spread of the MPID Act, following was stated in the Statement of Objects and Reasons, "There is a mushroom growth of Financial Establishments in the State of Maharashtra in the recent past. The sole object of these establishments is of grabbing money received as deposits from public, mostly middle class and poor on the promises of unprecedented high attractive interest rates of interest or rewards and without ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anism to provide remedial measures to the victim depositors and to check and punish Financial Establishments, which will include any person accepting deposit has fraudulently committed default duping the investors. 5.2 As the dispute in the present case, in its ultimate analysis, revolves around as to whether the payment made or amounts given by the appellants fall within the ambit of "deposit" as defined under the MPID Act, the relevant definition becomes pivotal to be considered. Section 2(c) of the MPID Act defines "deposit". 5.2.1 The definition is extracted hereinbelow: "2. Definitions.- In this Act, unless the context otherwise requires,- .............. (c) "deposit" includes and shall be deemed always to have included any receipt of money or acceptance of any valuable commodity by any Financial Establishment to be returned after a specified period or otherwise, either in cash or in kind or in the form of a specified service with or without any benefit in the form of interest, bonus, profit or in any other form, but does not include- (i) amount raised by way of share capital or by way of debenture, bond or any other instrument covered....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ined in Section 2(d) means "any person" accepting deposit either under any scheme or arrangement or "in any other manner". The definition takes out from its purview a corporation or cooperative society controlled or owned either by the State or the Central Government. It also excludes a banking company as defined under Section 5(c) of the Banking Regulation Act, 1949. 5.2.4 The definition of "financial establishment" in Section 2(d) of the MPID Act has also a wide coverage to mean "any person accepting deposit under any arrangement or in any other manner". The expanse of Section 2(d) of the MPID Act undoubtedly covers "any person accepting deposit". 5.3 As stated, Section 3 of the MPID Act is in respect of fraudulent default committed by Financial Establishments. The section provides for punishment upon conviction of every person including the promoter, partner, director, manager or employee found responsible for the management or in conducting the business or affairs of the Financial Establishment which has fraudulently defaulted in the repayment of deposits. 5.3.1 Section 3 is extracted hereunder, "3. Fraudulent default by Financial Establishment.- Any Financial....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 2(c) of the MPID Act. The Court highlighted that when the legislature mentioned in the definition in Section 2(c) the word "means", the definition becomes exhaustive. It was pinpointed that Section 2(c) uses the phrase "includes and shall be deemed to have always included". The Court further stated that the import of the same creates a legal fiction and the use of the words "includes" and "deemed to have always included" make the term "deposit" inclusive and not restrictive. 5.4.2 Following was observed in 63 Moons Technologies Ltd. (supra) regarding the expression "deposit", "The expression "deposit" is conspicuously broad in its width and ambit for it includes, not only any receipt of money but also the acceptance of any valuable commodity by a financial establishment under any scheme or arrangement. As a matter of interest, we may note at this stage that the expression "any" is used in the substantive part of the definition of the expression "deposit" on five occasions, namely: (i) Any receipt of money; (ii) Any valuable commodities; (iii) By any financial establishment; (iv) With or without any benefit; and (v) In a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mmodity by a financial establishment. On the second, the acceptance contemplated should be returnable after a specified period and thirdly, the return of such money or commodity could be in cash, kind, with or without any benefit of interest. All the above necessary ingredients to constitute "deposit" within the meaning of Section 2(c) of the MPID Act stands satisfied in respect of the transaction between the appellants and respondent Nos. 2 to 6. 6.2 Such "deposit" should be accepted by a "financial establishment". Looking to the wide import of the definition of Section 2(d) of the Act, since it includes any person accepting deposits, a private respondent like respondent Nos. 2 to 6 who accepted the money which was deposited stand covered within the concept of "Financial Establishment". The individual persons like respondents herein accepting the deposit and fraudulently defaulting become a "Financial Establishment" within the definition of Section 2(d) of the Act, and could be subjected to legal action under the provisions of the MPID Act. 6.3 The contention that giving of amounts to respondent Nos. 2 to 6 was a transaction of "loan", is a convenient suggestion. Even if the....