Criminal Application No.5130 of 2017

3rd September, 2018.

Petitioner Counsel: Mr. V.D. SALUNKE
Respondent Counsel: Mr. M.M. NERLIKAR

Cases Cited:
K.K. Baskaran Vs. State represented by its Secretary, Tamil Nadu & Ors., 2011(2) ALL MR 957 (S.C.)=AIR 2011 SC 1485 [Para 2]
Soma Suresh Kumar Vs. Goverment of Andhra Pradesh and others, AIR 2013 SC [Supp] 816 [Para 3]

JUDGMENT

JUDGMENT :- This proceeding is filed for relief of quashing of the case filed in Crime No.110/2015 which was registered with Police Station, Nilanga, District Latur. Though initially relief was claimed in respect of the entire case, the order of this Court dated 28.09.2017 shows that learned counsel for the applicants restricted the claim, relief only to the extent of allegations against the applicants in relation of Section 3 of Maharashtra Protection of Interest of Depositors [In Financial Establishments] Act, 1999 [hereinafter, in short, referred as "MPID Act"]. Both the sides are heard.

2. Present applicants are the Directors of Kolpe Patil Multi-state Co-operative Society Ltd., Pune. It is contended that the Institution is registered under Maharashtra Co-Operative Societies Act, 2002 and also under Banking Regulation Act, 1949. For the restricted relief, it is contention of the applicants that their Institution does not fall under the definition of "Financial Establishment" given in Section 2 [d] of MPID Act, and so, the prosecution under Section 3 of the said Act is not possible. On this point, learned counsel for the applicants submitted that the definition of "Banking Company" given in Section 5 [c] of the Banking Regulation Act, 1949 needs to be seen and the circumstance that the Institution of the applicant is doing banking business needs to be kept in mind. He also took this Court through the definition given in Section 3 [f] of Multi-State Co-operative Societies Act, 2002. The learned counsel submitted that in view of these provisions, the case filed against the applicants for the offence punishable under Section 3 of the MPID Act needs to be quashed and set aside. He took this Court through the rules also and he placed reliance on some observations made by Apex Court in the case reported as AIR 2011 SC 1485 : [2011(2) ALL MR 957 (S.C.)] [K.K. Baskaran Versus State represented by its Secretary, Tamil Nadu & Ors.]. This Court has carefully gone through the observations made by the Apex Court and the point involved. There was challenge to Tamil Nadu protection of Interests of Depositors [in Financial Establishments] Act, 1997. The Apex Court considered the provisions of MPID Act by observing that the provisions of MPID Act are paramateria similar to the provisions of Tamil Nadu Act and laid down that the Act was not ultra virus the constitution, said Tamil Nadu Act was constitutionally valid.

3. In Section 3 of MPID Act, the institutions covered by the Act are mentioned. The provision is as under :-

"3. Any Financial Establishment, which fraudulently defaults any repayment of deposit on maturity alongwith any benefit in the form of interest, bonus, profit or in any other form as promised or fraudulently fails to render service as assured against the deposit, every person including the promoter, partner, director, manager or any other person or an employee responsible for the management of or conducting of the business or affaires of such Financial Establishment shall, on conviction, be punished with imprisonment for a term which may extend to six years and with fine which may extend to one lax of rupees and such Financial Establishment also shall liable for a fine which may extend to one lax of rupees."

Learned A.P.P. placed reliance on the decision given by Apex Court reported as AIR 2013 SC [Supp] 816 [Soma Suresh Kumar v. Goverment of Andhra Pradesh and others]. The observations made by the Apex Court and the provisions of Andhra Pradesh Act quoted show that this Act is also paramateria similar to MPID. The definition of "Financial Establishment" given in Andhra Pradesh Act is similar to the definition given in Maharashtra Act. The Apex Court made it clear in para No.10 of the Judgment by referring the decision given by Full Bench of Bombay High Court that some differences were there in Tamil Nadu Act and Maharashtra Act, but there were minor differences and same view was taken in respect of Andhra Pradesh Act and Maharashtra Act. The view taken by Bombay High Court was not accepted which was to the effect that the Maharashtra Act transgressed into the field reserved for Parliament. The point involved is decided at para No.13 of the reported case and that para runs as under :-

13. Learned counsel for the petitioner raised a furlther contention that Vasavi Co-operative Bank Ltd. Does not come within the definition of "financial establishment" under Section 2 [c] of the Andhra Act. We find it difficult to accept that contention. What has been excluded from that definition is a Company registered under the Companies Act or a Corporation or a Co-operative Society owned and controlled by any State Government or the Central Government. The Society in question does not fall in that category. Consequently, the Co-operative Bank in question is also governed by the provisions of the Andhra Act."

4. Learned A.P.P. submitted that in the definition of "Financial Establishment" given in Section 2 [d] of MPID Act itself it is made clear that the Financial Institution which is excluded should be such Corporation or Co-operative Society which is either owned or controlled by any State Government or the Central Government. He took this Court through the definition of 'Multi-State Co-operative principles', which is as under :-

"2[d] "Financial Establishment" means any person accepting deposit under any scheme or arrangement or in any other manner but does not include a corporation or a co-operative socieity owned or controlled by any State Government or the Central Government or a banking company as defined under clause [c] of section 5 of the Banking Regulation Act, 1949."

The learned A.P.P. then took this Court through Section 2 [g] of Multi-State Co-operative Societies Act, 2002, which is as under :-

"Section 2 [g]" co-operative principles" means the co-operative principles specified in the First Schedule."

Learned A.P.P. then took this Court through ScheduleI [iv]. Learned A.P.P. submitted that in view of the Co-operative principles given in First Schedule given for Section 3 [g], the Institution of the applicants need to be treated only as Multi-State Co-operative Society and as the control over the Society is kept with members and as autonomy is also required to be preserved, such Institution cannot be excluded from the definition of "Financial Establishments" given under MPID Act. There is force in this submission. Fourth principle given in First Schedule of Multi-State Co-operative Societies Act, 2002, is as under:-

"4. Autonomy and Independence - Co-operatives are autonomous, selfhelp organisations controlled by their members. If co-operatives enter into agreement with other organisations including Government or raise capital from external sources, they do so on terms that ensure their democratic control by members and maintenance of Co-operative autonomy."

5. In view of aforesaid position of Law, this Court holds that the Institution of the present applicants which is basically Multi-State Co-operative Society is not excluded from the operation of MPID Act. Thus, the relief claimed cannot be given to the applicants and the proceeding stands dismissed.

Application dismissed.