APEX COURT HELD THAT
MAHARASHTRA PROTECTION OF INTEREST OF DEPOSITORS (IN FINANCIAL ESTABLISHMENTS) ACT, 1999 – Ss. 2(c), 2(d) & 3 – “Deposit” – “Financial Establishment” – Scope and ambit – Loan transaction – Whether excluded from concept of deposit – Fraudulent default – Maintainability of proceedings under MPID Act – Distinction between civil dispute and statutory remedy under MPID Act – Failure of proceedings under IPC – Effect.
Appellants advanced aggregate amount of Rs.2.51 crores to respondents for business purpose on assurance of repayment with interest at 24% per annum payable quarterly – Respondents admitted receipt of amounts but failed to repay principal and interest – Appellants initiated civil proceedings, cheque dishonour proceedings and criminal proceedings under IPC which failed on ground that dispute was civil in nature – Thereafter appellants invoked provisions of Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 seeking action under Section 3 – High Court dismissed proceedings holding that transaction was merely “loan transaction”, respondents were not “financial establishments” and no cognizable offence under MPID Act was made out – Sustainability.
Held : Definition of “deposit” under Section 2(c) MPID Act is of widest amplitude and includes any receipt of money by any financial establishment to be returned after specified period with or without benefit in form of interest, bonus or profit. Legislature deliberately employed expansive expressions such as “any receipt of money”, “any financial establishment” and “in any other form” to cast broad protective net in favour of depositors. Definition is inclusive and not restrictive in nature.
Essential ingredients of “deposit” are (i) receipt of money by financial establishment, (ii) obligation to return such money after specified period or otherwise, and (iii) return with or without interest or other benefit. All these ingredients stood satisfied in present case since respondents admittedly received amounts from appellants with assurance of repayment together with quarterly interest.
Merely describing transaction as “loan” does not exclude it from ambit of “deposit” under Section 2(c). Nomenclature of transaction is irrelevant. Court must examine intrinsic attributes and substance of transaction and not label assigned to it. Even a loan transaction would amount to “deposit” if it satisfies statutory ingredients under MPID Act.
Definition of “financial establishment” under Section 2(d) is equally broad and includes “any person” accepting deposits under any arrangement or in any other manner. Private individuals receiving deposits and defaulting in repayment are also covered within expression “financial establishment”.
Failure of criminal proceedings under IPC or finding that dispute is civil in nature does not bar invocation of remedies under MPID Act. Proceedings under IPC and action under MPID Act operate in distinct statutory spheres with separate ingredients and objectives. Complaint under Section 3 MPID Act constitutes independent statutory remedy.
State of Maharashtra v. 63 Moons Technologies Ltd., relied on.
(Paras 5 to 6.8)
HELD
Definition of “deposit” under Section 2(c) MPID Act is intentionally broad and inclusive, comprehending any receipt of money to be returned after specified period with or without interest or other benefit. (Paras 5.2 to 5.4.5)
To constitute “deposit”, three elements are necessary: receipt of money by financial establishment, obligation to return money after specified period, and return with or without interest or benefit. (Paras 6 and 6.1)
Use of expression “loan transaction” is not determinative. Substance and attributes of transaction prevail over nomenclature and even loan transactions may fall within ambit of “deposit” under MPID Act. (Para 6.3)
Expression “financial establishment” includes any person accepting deposits in any manner and is not confined to organised financial institutions or public schemes alone. (Paras 5.2.2 to 6.2)
Failure to establish offences under IPC does not create embargo against proceedings under MPID Act since both remedies operate in distinct statutory domains. (Paras 6.4 to 6.7)
RESULT
Appeal allowed. Judgment of High Court set aside. Appellants held entitled to invoke Section 3 and pursue remedies under Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 against respondents.
