Case Note & Summary
The petitioner, Mr. Ashish Mahendrakar, filed a writ petition under Article 226 of the Constitution of India and Section 482 of the Code of Criminal Procedure, 1973, challenging an FIR registered by the Economic Offences Wing (EOW) of Mumbai under the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 (MPID Act). The FIR alleged that the petitioner, along with others, had accepted deposits from the public and failed to repay them. The petitioner contended that the transactions in question were intercorporate deposits/loans between companies registered under the Companies Act, 1956, and thus did not fall within the definition of 'deposit' under the MPID Act. The intervenors, who were original depositors, supported the FIR. The court examined the definition of 'deposit' under Section 2(c) of the MPID Act, which excludes deposits covered under the Companies Act, 1956 and rules made thereunder. The court noted that the Companies Act, 1956, through Section 58A and the Companies (Acceptance of Deposits) Rules, 1975, specifically regulates deposits accepted by companies, including intercorporate deposits. The court held that the MPID Act is a special statute intended to protect depositors who are members of the public, not corporate entities making intercorporate loans. Since the transactions in question were between companies, they were governed by the Companies Act, 1956, and not the MPID Act. The court quashed the FIR and all proceedings arising therefrom, allowing the petition.
Headnote
A) Criminal Law - MPID Act - Definition of Deposit - Intercorporate Loan - The core issue was whether a loan advanced by one company to another company registered under the Companies Act, 1956 constitutes a 'deposit' under Section 2(c) of the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 (MPID Act). The Court held that such intercorporate deposits are not covered under the MPID Act as they fall within the exclusion clause of Section 2(c)(i) read with Section 58A of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. The MPID Act is intended to protect depositors who are members of the public, not corporate entities making intercorporate loans. (Paras 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34)
Issue of Consideration
Whether an intercorporate deposit/loan made by a company with another company registered under the Companies Act, 1956 amounts to a 'deposit' within the meaning of the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999.
Final Decision
The court allowed the petition and quashed FIR No. 1 of 2019 registered by Economic Offences Wing, Mumbai under the MPID Act and all proceedings arising therefrom.
Law Points
- Intercorporate deposit is not a deposit under MPID Act
- Definition of deposit under MPID Act excludes deposits covered under Companies Act
- 1956
- Section 58A of Companies Act
- 1956 and rules thereunder govern deposits accepted by companies
- MPID Act applies to deposits from public not intercorporate loans
Case Details
Writ Petition No. 3228 of 2019
Ranjit More, N. J. Jamadar
Mr. Kevic Setalvad, Senior Advocate a/w. Mr. Ayaz Khan, Mr. Sunny Punamia, Ms. Sneha Prabu i/by M/s. SSP Legal and Co. for Petitioner; Mr. Sandeep Karnik a/w. Mr. Shivali Khade i/by Ms. Sangita Mistry for Applicants/Intervenors; Mr. Prakash J. Salsingekar – Spl.P.P. for respondent No.1 State
State of Maharashtra, Shri Rajwardhan Sinha, Mr. Parag Manere, P.I., E.O.W. Mumbai
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Nature of Litigation
Criminal writ petition under Article 226 of Constitution of India and Section 482 of CrPC seeking quashing of FIR under MPID Act.
Remedy Sought
Petitioner sought quashing of FIR No. 1 of 2019 registered by Economic Offences Wing, Mumbai under MPID Act and all proceedings arising therefrom.
Filing Reason
Petitioner challenged the FIR on the ground that the transactions were intercorporate deposits/loans between companies registered under Companies Act, 1956 and thus not covered under MPID Act.
Issues
Whether an intercorporate deposit/loan made by a company with another company registered under the Companies Act, 1956 amounts to a 'deposit' within the meaning of the MPID Act.
Submissions/Arguments
Petitioner argued that the transactions were intercorporate deposits/loans between companies, which are excluded from the definition of 'deposit' under Section 2(c) of MPID Act as they are governed by Companies Act, 1956.
Respondent State argued that the MPID Act is a beneficial legislation and should be interpreted broadly to include intercorporate deposits.
Ratio Decidendi
Intercorporate deposits/loans between companies registered under the Companies Act, 1956 are not 'deposits' under Section 2(c) of the MPID Act because they fall within the exclusion clause for deposits covered under the Companies Act, 1956 and rules made thereunder. The MPID Act is intended to protect public depositors, not corporate entities making intercorporate loans.
Judgment Excerpts
A question of seminal importance is raised in this petition under Article 226 of Constitution of India and section 482 of the Code of Criminal Procedure, 1973, namely, whether the intercorporate deposit/loan, i.e., a loan advanced / deposit made by a company with another company registered under the provisions of the Companies Act, 1956 would amount to a 'deposit' within the meaning and for the purpose of the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999.
Procedural History
The petitioner filed a writ petition under Article 226 of the Constitution of India and Section 482 of CrPC challenging FIR No. 1 of 2019 registered by Economic Offences Wing, Mumbai under the MPID Act. The petition was heard along with Criminal Application No. 385 of 2019 filed by intervenors. The court reserved judgment on 20th August 2019 and pronounced on 13th September 2019.
Acts & Sections
- Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999: Section 2(c), Section 3, Section 4
- Companies Act, 1956: Section 58A
- Companies (Acceptance of Deposits) Rules, 1975: Rule 2(b)
- Constitution of India: Article 226
- Code of Criminal Procedure, 1973: Section 482
