HC exempts inter-corp deposits from tough law
Mumbai: The Bombay high court has held that inter-corporate deposits do not come under the ambit of the Maharashtra Protection of Interest of Depositors (MPID) Act, a stringent law meant to protect the interests of small depositors.
The judgment by a bench of Justices Ranjit More and N J Jamadar was on a petition filed by Ashish Mahendrakar, director of a Yash Birla-promoted company, Birla Power Solutions. The company and its directors are accused under MPID Act of cheating depositors after raising funds for its businesses. The state Economic Offences Wing (EOW) had registered a case in December 2013 on a complaint by the Hajarimal Somani Memorial Trust, which placed a deposit of Rs 1 crore with Birla Power Solutions in 2012 to be repaid with interest. Birla Power Solutions had defaulted.
Yash Birla Group has Rs 89 crore of unpaid inter-corporate loans in all. The case argued by Kevic Setalvad and counsel
Birla Power Solutions, headed by Yash Birla, accepted deposits; including a deposit of 1cr from Hajarimal Somani Memorial Trust on Mar 9,’12
The company defaulted in repayment to the Trust. It was alleged that
Sunny Punamiya was that such loans or deposits do not fall under MPID Act as they are given by one corporate to another. The company’s assets, including Birla House at Walkeshwar, have been attached. These properties were valued at Rs 525 crore in 2016, said the petition, arguing that it far exceeded the amounts due to investors.
Special public prosecutor for the EOW of Mumbai police, Prakash Salsingekar, opposed the petition, arguing that the MPID Act — enacted to protect investors — itself enumerates amounts that don’t fall within the term ‘deposits’ and that the “court cannot supplant the exthe firm accepted deposits from thousands of investors, including firms. An FIR was filed against the co
Two orders were passed under MPID Act, various Yash Birla cos’ properties were attached
clusion clause by adding an item”, which was not in the law. He argued that a distinction cannot be carved out between depositors as it would defeat the purpose of the Act.
The court held that loan advanced or deposit made by a company with another company registered under the Companies Act would not amount to a “deposit” under the meaning of the MPID Act.
The HC analysed provisions of MPID Act, the Companies Act as well as a Tamil Nadu law meant to protect depositors. The Supreme Court, it noted, had said the three Acts were meant to “protect the interests of small depositors from fraud...”.