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2024 (6) TMI 487 - HC - Indian LawsApplicability of the MPID Act to Co-operative Banks - Financial Establishment under Section 2(d) of the MPID Act - fraud practised while distributing loans - HELD THAT - Merely because a co-operative bank to which the provisions of the BR Act are applicable by virtue of insertion of Section 56(a) with effect from 01.03.1966 or by virtue of amendment coming into effect from 01.04.2021 thereby transforming into a non-obstante clause, cannot be said to have been excluded by implication from the ambit of the MPID Act, in view of the definition of Financial Establishment contained in Section 2(d) of the MPID Act. True it is that any co-operative bank registered under the Central or State legislature to which provisions of BR Act are applicable, would be under supervision of the RBI. However, one cannot lose site of the fact that the BR Act merely seeks to have a control over the functioning of all the banking companies or the co-operative banks, however, it does not contain any specific provision defining any act or provide for any punishment for the offences which are punishable under Section 409, 420, 467, 468 and 471 read with Section 34 of the Indian Penal Code. Only some acts have been made punishable by making the offences cognizable as mentioned in Section 47. Consequently, it cannot be said that the purpose for which MPID Act has been brought in the statute book stands served by bringing the co-operative banks registered under the State legislature within the sweep of the BR Act. Both these enactments operate in different spheres. The Criminal Writ Petition is dismissed.
Issues Involved:
1. Quashment of Crime No. 121/2022. 2. Applicability of the MPID Act to Co-operative Banks. 3. Interpretation of "Financial Establishment" under Section 2(d) of the MPID Act. Summary: Issue 1: Quashment of Crime No. 121/2022 This writ petition was filed u/s 226 of the Constitution of India read with Section 482 of the Code of Criminal Procedure seeking quashment of Crime No. 121/2022 registered with Kotwali Police Station, Ahmednagar, and subsequently transferred to the Economic Offences Wing, Ahmednagar, for offences punishable u/s 409, 420, 467, 468, 471 read with Section 34 of the Indian Penal Code and also u/s 3 of the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 (MPID Act). Issue 2: Applicability of the MPID Act to Co-operative Banks The petitioner challenged the applicability of the MPID Act to the co-operative bank, arguing that the bank falls under the definition of a "banking company" as per Section 5(c) of the Banking Regulation Act, 1949 (BR Act), and thus should be excluded from the MPID Act. The petitioner cited the amendment to Section 56 of the BR Act, which extends its provisions to co-operative societies, asserting that this amendment implies exclusion from the MPID Act. Issue 3: Interpretation of "Financial Establishment" under Section 2(d) of the MPID Act The court examined whether a co-operative bank registered under the Maharashtra Co-operative Societies Act is excluded from the MPID Act. The definition of "Financial Establishment" u/s 2(d) of the MPID Act excludes a "banking company" as defined under Section 5(c) of the BR Act. The petitioner relied on the Supreme Court decision in Pandurang Ganpati Chaugule Vs. Vishwasrao Patil Murgud Sahakari Bank Ltd., arguing that co-operative banks fall under the BR Act and should be excluded from the MPID Act. Court's Analysis and Conclusion: The court held that the MPID Act and the BR Act operate in different spheres. The MPID Act aims to protect investors from fraudulent financial establishments, while the BR Act regulates the functioning of banking companies. The court emphasized that the definition of "Financial Establishment" in the MPID Act does not exclude co-operative banks unless they are owned and controlled by the State or Central Government. The court found that the legislative intent was not to exclude co-operative banks from the MPID Act, despite their regulation under the BR Act. Final Judgment: The Criminal Writ Petition was dismissed, and the court ruled that the MPID Act applies to the co-operative bank in question. Pending criminal applications were disposed of, and the rule was discharged.
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