MAHARASHTRA PROTECTION OF INTEREST OF DEPOSITORS (IN FINANCIAL ESTABLISHMENTS) ACT, 1999

Section 4

Attachment of properties on default of return of deposits - Spot trading in commodities - Acceptance of deposits but failed to return deposits on demand - Validity of attachment Notification

NSEL, a wholly owned subsidiary of respondent-company, operated as an exchange for spot trading in commodities. It offered paired contracts, which enabled traders either by themselves or through their brokers, to simultaneously enter into such contracts. In July 2013, various persons, who traded on the platform of NSEL, claimed that other trading members defaulted in the payment of approximately Rs. 5,600 crores. Economic Offences Wing (EOW) of Mumbai Police registered the case against NSEL under sections 3 and 4 of the MPID Act. Thereafter, the State of Maharashtra also issued a Notification under section 4 of the MPID Act for attachment of properties of NSEL. NSEL filed writ petition challenging the invocation of the MPID Act on the ground that the exchange was not a 'financial establishment' under the provisions of the Act, therefore, the State of Maharashtra ought not to have issued attachment Notification under section 4. High Court quashed the said Notification. Hence, present appeal was filed. Held: NSEL received money in form of Settlement Guarantee Fund that was returned in money and services, and was not covered by exceptions, it would fall within expression 'deposit' as defined in section 2(c). NSEL being a person having accepted deposits, it was a 'financial establishment' for purposes of MPID Act. NSEL through 'contract specifications', represented that on receiving money and commodities, the members would receive 'assured returns' and a 'service'. Though NSEL had been receiving 'deposits', however, it had failed to provide services as promised against deposits and had failed to return the deposits on demand. Therefore, the State of Maharashtra was justified in issuing the attachment Notification under section 4 of the MPID Act.

REFERRED : KK Baskaran v. State (2011) 3 SCC 793, Sonal Hemant Joshi v. State of Maharashtra (2012) 10 SCC 601, New Horizon Sugar Mills Ltd. v. Government of Pondicherry (2012) 116 SCL 80 : 2013 TaxPub(CL) 0180 (SC), KK Baskaran (supra), State v. KS Palanichamy (2017) 16 SC 384 and PGF v. Union of India (2014) 125 SCL 243 (SC) : 2013 TaxPub(CL) 0497 (SC), 63 Moons Technologies Ltd. v. Union of India (2019) 105 taxmann.com 6 (SC) : 2019 TaxPub(CL) 0652 (SC), Indra Sarma v. V.K.V. Sarma (2013) 15 SCC 755, Karnataka Power Transmission Corpn. v. Ashok Iron Works (P.) Ltd. (2009) 3 SCC 240 and Ramanlal Bhailal Patel v. State of Gujarat (2008) 5 SCC 449

FAVOUR : In favour of appellants

A.Y. :

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