Supreme Court Upholds Constitutional Validity Of Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act

In its judgment upholding the attachment of properties of 63 Moons Technologies, the Supreme Court also rejected the challenge against the constitutional validity of the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act 1999.

In this case, the petitioner (63 Moons Technologies Ltd) before the Bombay High court had contended that the Section 4 of the MPID Act is arbitrary and constitutionally invalid and it suffers from over-breadth since (a) Sub-section (1) of Section 4 mandates the attachment of property of the 'promoter, director, partner, manager or member of the said Financial Establishment.'; (b) Sub-section (2) of Section 4 divests the title of the attached properties without due process of law. It also contended that the divestment of title of a property by a summary procedure under Section 7 is arbitrary. The High Court did not decide the issue.

In appeal filed by the before the Apex Court, the respondent (63 Moons Technologies Ltd) submitted that in in KK Bhaskaran v. State (2011) 3 SCC 793, the Supreme Court had held that the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act 199724 is constitutionally valid. It was contended that since the provisions of MPID Act were not considered by the Court in the said judgment,  the Court in the present case is not precluded from examining the constitutional validity of the provisions of the MPID Act.

Referring to the said judgment in Bhaskaran, the bench comprising Justices DY Chandrachud, Surya Kant and Bela M Trivedi observed it concludes that the Tamil Nadu enactment did not violate the provisions of Articles 14, 19(1)(g) or 21 of the Constitution.

"The judgment held that the Tamil Nadu Act is constitutionally valid and constitutes a salutary measure which was long over-due to deal with these matters. Significantly, the above extracts from the decision in Bhaskaran (supra) indicate that the differences between the enactment in Tamil Nadu and Maharashtra ―are minor and the view of the court on the validity of the former will govern the validity of the latter enactment as well."

The court further noted that the validity of the MPID Act was specifically dealt with in two decisions in State of Maharashtra v. Vijay C. Puljal (2012) 10 SCC 599 and Sonal Hemant Joshi v. State of Maharashtra (2012) 10 SCC 601. The court, therefore, held thus:

"Having discussed the judgments of this Court on the constitutional validity of the state legislations governing financial establishments offering deposit schemes, including the MPID Act, there is no reason for us to reopen the question. This Court has held that the MPID Act is constitutionally valid on the grounds of legislative competence and when tested against the provisions of Part III of the Constitution"

Case details

State of Maharashtra  vs 63 Moons Technologies Ltd | 2022 LiveLaw (SC) 400 | CA 2748-49 of 2022 | 22 April 2022

Coram: Justices DY Chandrachud, Surya Kant and Bela M Trivedi

Counsel: Sr. Adv Abhishek Manu Singhvi for appellant, Sr. Adv Mukul Rohatgi for respondent

Headnotes

Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act 1999 ; Section 2(c) - If the financial establishment is obligated to return the deposit without any increments, it shall still fall within the purview of Section 2(c) of the MPID Act, provided that the deposit does not fall within any of the exception. (Para 37)

Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act 1999 - Constitutional Validity upheld - MPID Act is constitutionally valid on the grounds of legislative competence and when tested against the provisions of Part III of the Constitution. [Referred to KK Bhaskaran v. State (2011) 3 SCC 793, State of Maharashtra v. Vijay C. Puljal (2012) 10 SCC 599 and Sonal Hemant Joshi v. State of Maharashtra (2012) 10 SCC 601] (Para 54, 57)

Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act 1999 ; Section 2(c) - National Spot Exchange Ltd - Settlement Guarantee Fund-  Though the SGF is termed as a "security deposit' in nomenclature, its features do not represent a security deposit. Since NSEL receives 'money' in the form of that is returned in money and services, and is not covered by the exceptions, it would fall within the expression 'deposit' as defined in Section 2(c) of the Act - NSEL is a 'financial establishment' for the purposes of the Act if it is a 'person accepting deposit'. (Para 41,31)

Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act 1999 ; Section 2(c) - Deposit - Ingredients (i) Any receipt of money or the acceptance of a valuable commodity by a financial establishment; (ii) Such acceptance ought to be subject to the money or commodity being required to be returned after a specified period or otherwise; and (iii) The return of the money or commodity may be in cash, kind or in the form of a specified service, with or without any benefit in the form of interest, bonus, profit or in any other form. (Para 31)

Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act 1999 ; Section 2(c) - Valuable Commodity - Unlike many other state enactments which govern the field, clause (c) of Section 2 of the MPID Act comprehends within the meaning of a deposit not only the receipt of money but of any valuable commodity as well - The phrase 'valuable commodity' cannot be restricted to only mean precious metals. Agricultural commodities which NSEL trades in will fall within the purview of the term. (Para 35, 43)

Interpretation of Statutes - Where the definition of a word is inclusive, as presaged by the adoption of the expression 'includes', it is prima facie extensive. (Para 32)

Summary : Supreme Court set aside the Bombay High Court's order of freeing the attachment of assets of 63 Moons Technologies.

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