HC ex­empts in­ter-corp de­posits from tough law

The Times of India (New Delhi edition) - - Times Global - Swati.Desh­pande

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...”.

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