Bombay High Court
Rajendrakumar Aatmaram Agarwal vs The State Of Maharashtra And Others on 6 May, 2024
Author: Mangesh S. Patil
Bench: Mangesh S. Patil
2024:BHC-AUG:9564-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
CRIMINAL WRIT PETITION NO.157 OF 2024
Rajendrakumar Aatmaram Agarwal ... PETITIONER
VERSUS
1. The State of Maharashtra
at the instance of Economic Offences
Wing, Office of Superintendent,
Ahmednagar, Dist. Ahmednagar
Maharashtra
2. Nagar Urban Co-operative Bank
through its Liquidator, appointed
by Central Registrar of Co-operative
Societies Act having office at
Bank Road, Ahmednagar - 414001
3. Mr. Rajendra Gandhi ... RESPONDENTS
WITH
CRIMINAL APPLICATION NO.1341 OF 2024
IN
CRIMINAL WRIT PETITION NO.157 OF 2024
Achyut S/o. Sadashiv Pingale ... APPLICANT
VERSUS
1. Rajendrakumar Aatmaram Agarwal
2. State of Maharashtra
through, Deputy Superintendent of Police,
Economic Offences Wing, Ahmednagar ... RESPONDENTS
WITH
CRIMINAL APPLICATION NO.1370 OF 2024
IN
CRIMINAL WRIT PETITION NO.157 OF 2024
1. Krishnanath Vishnu Waykar
2. Sulochana Asaram Bhujbal
3. Ashok Maruti Suryawanshi,
1/14
969.Cri.WP.157.2024+.odt
4. Sidharth Kamlakar Shelke,
5. Rajshree Kamlakar Shelke,
6. Prafulla Mohniraj Mahajan ... APPLICANTS
VERSUS
1. Rajendrakumar Atmaram Agrawal
2. The State of Maharashtra,
at the instance of Economic Offence Wing,
Office of the Superintendent, Ahmednagar,
Dist. Ahmednagar.
3. Nagar Urban Co-operative Bank,
through its Liquidator,
appointed by Central Registrar of
Co-op. Society having its office at
Bank Road, Ahmednagar - 414 001
4. Rajendra Gandhi, ... RESPONDENTS
WITH
CRIMINAL APPLICATION NO.1418 OF 2024
IN
CRIMINAL WRIT PETITION NO.157 OF 2024
1. Mangesh S/o. Suryakant Jeware
2. M/s. Satyam Traders though its proprietor
Mahesh S/o. Suryakant Jeware
3. Bhagwan Madhav Gursali
4. Tukaram Ganpat Shinde
5. Laxmi Uddhav Kshirsagar
6. Satish Bhagwan Gursali
7. Sachin Suryakant Ingale
8. Sanjay Mahadeo Kumbhar
9. Vimal Bajirao Kale
10. Vishnu Gorakh Jore
11. Murlidhar Prabhakar Bhakare
12. Bharti Maruti Golekar
13. Maruti Shankar Golekar
14. Devendra Arvind Vibhute
15. Mahendra Arvind Vibhute
16. Arvind Krishnanath Vibhute
17. Bhausaheb Popat Pathare
18. Prafulla Fulchand Kothari
19. Suryakant Fulchand Kothari
20. Rani Rajendra Bhosale
2/14
969.Cri.WP.157.2024+.odt
21. Balasaheb Dada Pawar
22. Sumit Satish Raut
23. Satish Kerba Raut
24. Suman Vasantrao Tapkir
25. Vimal Ajinath Tapkir
26. Ajinath Vasant Tapkir
27. Ramesh Bhausaheb Tapkir
28. Arun Raosaheb Tapkir
29. Ramchandra Daulat Tapkir
30. Jaydeep Rama Tapkir
31. Ramdas Maruti Mhaske
32. Bhaimrao Dagdu Kale
33. Rajashri Bhausaheb Pathare
34. Shanta Murlidhar Prabhakar Bhakare ... APPLICANTS
VERSUS
1. The State of Maharashtra
at the instance of Economic Offences Wing,
Office of Superintendent, Ahmednagar,
Dist. Ahmednagar.
2. Nagar Urban Co-operative Bank
through it's Liquidator,
appointed by Central Registrar of Co-operative
Societies Act having office at Bank Road,
Ahmednagar-414001.
3. Mr. Rajendra Gandhi
4. Rajendrakumar Aatmaram Agarwal ... RESPONDENT
...
Advocate for petitioner : Mr. Vijay Thorat i/b. Mr. Atul M. Karad
Addl.P.P. for respondent No.1/State : Mr. M.M. Nerlikar
Advocate for respondent No.2 : Mr. Ajay T. Kanawade
Advocate for respondent No.3 : Mr. P.R. Katneshwarkar
Advocate for Applicant in APPLN/1341/2024 : Mr. P.M. Salunke
Advocate for Applicant in APPLN/1370/2024 : Mr. Y.V. Kakde
Advocate for Applicant in APPLN/1418/2024 : Mr. N.B. Narwade
...
CORAM : MANGESH S. PATIL &
SHAILESH P. BRAHME, JJ.
Reserved on : 04.04.2024
Pronounced on : 06.05.2024
3/14
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JUDGMENT (PER : MANGESH S. PATIL, J.) :
Heard. Rule in all these matters. Rule is made returnable
forthwith.
2. This is a writ petition filed under Article 226 of the
Constitution of India read with Section 482 of the Code of Criminal
Procedure seeking quashment of Crime No.121/2022 registered with
Kotwali Police Station, Ahmednagar and subsequently transferred to the
Economic Offences Wing, Ahmednagar, for the offences punishable under
Section 409, 420, 467, 468, 471 read with Section 34 of the Indian Penal
Code and also under Section 3 of the Maharashtra Protection of Interest
of Depositors (In Financial Establishments) Act, 1999 (herein after the
MPID Act).
3. The substance of the allegations as can be deduced are to the
effect that respondent No.2 is a Cooperative Bank registered under the
Maharashtra Cooperative Societies Act, 1960 (herein after the
Cooperative Societies Act). The Reserved Bank of India (RBI) issued
licence to it for banking business by order dated 10.12.1986. The
petitioner was elected as a Director on the Board of Directors for the
tenure from November 2014 to November 2019. The RBI appointed an
administrator to manage the affairs of the bank with effect from
01.08.2019. After the tenure of the Administrator was over, the
petitioner was elected as a Chairman of the Board of Directors for the
tenure 02.12.2021 to December 2026. He is stated to have resigned on
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06.07.2022 after noticing the irregularities in the administration of the
bank by other directors and the staff.
4. Noticing loss suffered by respondent No.2 - Bank resulting in
negative net worth, the RBI by order dated 06.12.2021 put restrictions on
the bank and thereafter by the order dated 04.10.2023 it cancelled the
bank's licence and a liquidator was appointed on 08.11.2023.
5. The respondent No.3 lodged a complaint with the Economic
Offences Wing , Ahmednagar (EOW) alleging fraud having been practised
while distributing loans. The Administrator was directed by the EOW
and conducted an inquiry.
6. The Administrator on inquiry concluded that irregularities
were committed in respect of disbursement of loan in eight loan accounts
holding one Dilip Gandhi, a borrower and guarantor as well as the valuer
responsible for it.
7. Simultaneously, respondent No.3 filed a complaint with
Kotwali Police Station in the year 2019, however, since nothing was
transpiring, Criminal Writ Petition No.1224/2020 was filed in this Court
and pursuant to the directions of the Court the present crime was
registered at Kotwali Police Station and subsequently it was transferred to
the EOW.
8. It is alleged in the FIR that respondent No.3 is the member
and account holder of respondent No.2 - bank. He was also a director
between 2008 and 2014 and having personal knowledge about the
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statutory audit that was being conducted every year. He alleges that after
having gone through the audit reports for the period between 2015-2016
and 2020-2021 he realized that there was rampant mismanagement and
even misappropriation committed in connivance by the directors, officers
and the borrowers causing huge loss to the Bank. He has given several
details in respect of the specific loans disbursed to various entities and
the manner in which misappropriation was committed.
9. The learned advocate Mr. Thorat for the petitioner at the
outset would submit that the petitioner does not have any objection for
allowing the applications for intervention. He would also submit that
even he has not been objecting to the prosecution and is not putting up
any challenge to the offences being invoked against him under the Indian
Penal Code under different sections. He submits that he is merely putting
up a challenge to the petitioner's prosecution under the provisions of the
MPID Act.
10. He would submit that the object for which MPID Act was
brought into the statute book was to monitor functioning of the Financial
Establishments in the State and to protect the interest of the depositors
who are assured of attractive interest but fail to keep the promise
resulting in public resentment since they are duped by the unscrupulous
activities.
11. He would submit that Section 3 of the MPID Act makes any
fraudulent default in repayment of deposit by a financial establishment a
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crime. Section 2(d) defines "Financial Establishment" and though it
expressly excludes a co-operative society owned or controlled by any
State or Central Government, his emphasis is on the fact that even this
definition of "Financial Establishment" expressly excludes a "Banking
Company" as defined under Clause (c) of Section 5 of the Banking
Regulation Act, 1949 (the BR Act). He would submit that though
respondent No.2 - bank is neither owned and controlled by the State
Government or the Central Government, it would still be a "banking
company" as defined under Section 5(c) of the BR Act by implication. He
would advert our attention to the provision of Section 5(c) of the BR Act
which defines a 'Banking Company' to mean any company which
transacts the business of banking in India. He would submit that Section
56 of the BR Act expressly lays down the extent to which its provisions
would apply to the Co-operative Societies. He would submit that by
virtue of amendment in Section 56 by the Act 39 of 2020, it has now
been converted as a non-obstante clause and expressly states that
notwithstanding anything contained in any other law, the provisions of
the BR Act would apply to or in relation to co-operative societies as they
apply to the banking companies subject to certain modifications. He
would submit that by Sub-Clause (cci) of Clause (c) of Section 56,
definition of Co-operative Bank and by a similar Sub-Clause (ccii-a) Co-
operative Societies have been defined to be a Co-operative Bank or a
Central Co-operative Bank and a society registered under Co-operative
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Societies Act. He would, therefore, submit that since by virtue of such
amendment effected in the year 2021, Section 56 expressly declares that
the provisions of the BR Act would have primacy over any Act in respect
of a co-operative society, the whole purpose of promulgating MPID Act as
declared in the objective stands subserved. He would submit that the
very object which led the State legislature to bring into the statute book
the MPID Act stands sub-served by implication since even a Co-operative
Bank would have to be compliant with the provisions of the BR Act
having perineal supervision of the RBI.
12. Mr. Thorat would then submit that "Financial Establishment"
as defined under Section 2(d) of the MPID Act inter alia excludes the
"Banking Company" as defined under Clause (c) of Section 5 of the BR
Act. In its wisdom the State legislature had thought it appropriate to
exclude the banking companies in all probability for the obvious reasons
that all these banking companies would be under the supervision of the
Reserve Bank of India. If by virtue of amendment, for all practical
purposes a co-operative bank has been taken under the sweep of the
Central legislation like the BR Act, the purpose for which the MPID Act
was enacted would no longer be necessary qua the co-operative banks
registered under the Co-operative Societies Act.
13. Mr. Thorat would refer to and rely upon the decision in the
matter of Pandurang Ganpati Chaugule Vs. Vishwasrao Patil Murgud
Sahakari Bank Ltd.; (2020) 9 SCC 215 and particularly the conclusion
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drawn therein based on the interpretation of the provisions of the BR Act
and the amendment effected therein in Section 56(a) which came into
being on 01.03.1966. He would precisely advert our attention to the
paragraph No.103 of the judgment, wherein, it has been observed that as
a consequence of inclusion of Section 56(a) in the BR Act with effect
from 01.03.1966, the category of banking companies as defined under
Section 5(c) of the BR Act would encompass co-operative banks
registered under the State Co-operative Laws and Multi-State Co-
operative Banks registered under the Multi-State Co-operative Societies
Act, 2002.
14. Per contra, the learned APP, the learned advocate for
respondent No.2, the learned advocate for respondent No.3 and that of
the intervenors would submit that the very stand of the petitioner that
any co-operative bank registered under the Co-operative Societies Act
would stand excluded from the ambit of MPID Act that too relying upon
the decision in the matter of Pandurang Ganpati Chaugule (supra) is
fallacious. A division bench of this Court in the matter of Shridhar S/o
Udhav Kolpe V. State of Maharashtra (Criminal Application No.5130 OF
2017 dated 03.09.2018) has held that the provisions of the MPID Act
would apply to the co-operative banks except those have been expressly
excluded by virtue of they being owned and controlled by the State
Government in accordance with definition of "Financial Establishment"
contained in Section 2(d) of the MPID Act.
969.Cri.WP.157.2024+.odt
15. They would submit that in view of the decision in the matter
of New Horizon Sugar Mills Ltd. Vs. Government of Pondicherry; (2012)
10 SCC 575, State legislatures have been declared to have the authority
to enact laws concerning the financial establishments to safeguard the
interest of the investors. They would refer to the decisions in the
following matters :
i. K.K. Baskaran Vs. State; (2011) 3 SCC 793,
ii. State Vs. K.S. Palanichamy ; (2017) 16 SCC 384
iii. PGF Ltd. Vs. Union of India; (2015) 13 SCC 50
16. On facts, they would argue that it is a matter of fraud
exceeding Rs.100 crore and the offence being cognizable, the prosecution
should be extended an opportunity to substantiate the charge.
17. It is necessary to reiterate that as has been submitted by the
learned advocate Mr. Thorat, the petitioner has not been seriously
objecting to invocation of the provisions under the Indian Penal Code and
is merely interested in putting up a challenge to invocation of Section 3
of the MPID Act. Consequently, the inquiry before us is limited in
ascertaining as to if a co-operative bank registered under the Maharashtra
Co-operative Societies Act stands excluded from the net of the MPID Act,
by virtue of implication, in view of amendment w.e.f. 01.04.2021 to
Section 56 of the BR Act making it applicable to the co-operative banks
registered under the Central or State legislation.
18. At the outset, it is necessary to bear in mind that as far as
power of the state legislature in enacting MPID Act is concerned, the
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issue has been authoritatively put to rest by the observations of the
Supreme Court in the matter of New Horizon Sugar Mills Ltd. (supra).
19. Obviously, the object of enacting MPID Act is to secure the
interest of the investors in the wake of mushrooming growth of the
financial establishments. Section 3 of the MPID Act inter alia provides
for punishment for any financial misdeeds as contemplated therein. It
uses the word "Financial Establishments" which has been defined under
Section 2(d) of the MPID Act and reads thus :
"Section 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 society 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."
20. As can be seen, the State Legislature in its wisdom has
excluded the Co-operative Societies owned and controlled by the State
Government, it also excludes the 'banking companies' as defined under
Section 5(c) of the BR Act.
21. At the first blush, the erudite submission of the learned
advocate Mr. Thorat relying upon Pandurang Ganpati Chaugule (supra) is
indeed attractive. However, it overlooks the fact that Pandurang Ganpati
Chaugule (supra) is a matter, wherein, the Supreme Court was called
upon to decide as to if the provisions of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (SARFAESI Act) are applicable to the Co-operative Banks
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registered under the State legislation. It is in this context that Pandurang
Ganpati Chaugule (supra) will have to be understood. The issue before
us was not germane to the decision in the matter of Pandurang Ganpati
Chaugule (supra). With respect, a co-operative bank by virtue of Section
56(a) having been included in the BR Act with effect from 01.03.1966,
would be a banking company as defined under Section 5(c) of the BR
Act. However, the issue before us presents a peculiar state of affairs,
which is in the context of MPID Act which makes certain acts punishable
precisely for the object of securing interest of the investors. Even if a co-
operative bank for the purpose of the provisions of SARFAESI Act would
be a banking company as has been held in Pandurang Ganpati Chaugule
(supra), the definition of "Financial Establishment" contained in Section
2(d) of the MPID Act would be decisive.
22. The State Legislature in its wisdom, while defining "Financial
Establishment" has consciously excluded only the Co-operative Societies
owned and controlled by the State Government as a distinct and separate
category, as distinguished from a "Banking Company" as defined under
Section 5(c) of the BR Act. If this be so, harmonious interpretation will
have to be resorted to in gathering the intention of the legislature. Had it
really intended to exclude the provisions of MPID Act qua any
establishment governed by the BR Act, it could have expressly stated so.
23. Bearing in mind the fact that Section 56(a) was inserted in
BR Act on 01.03.1966 one will have to proceed on the premise that the
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State legislature was aware that even a co-operative bank registered
under the Co-operative Societies Act would be governed by the BR Act.
If, still, it has defined 'Financial Establishment' by expressly making
distinction between a 'co-operative society' owned and controlled by the
State Government and a 'Banking Company' as defined under Section
5(c) of the BR Act, in our considered view, 'Financial Establishment' as
defined under Section 2(d) would include a co-operative bank, not
owned and controlled by the Central Government or the State
Government. The issue considered and decided by the Supreme Court in
the matter of Pandurang Ganpati Chaugule (supra) will have to be
understood in the backdrop of these factors, which in our considered
view are important.
24. Conversely, merely because a co-operative bank to which the
provisions of the BR Act are applicable by virtue of insertion of Section
56(a) with effect from 01.03.1966 or by virtue of amendment coming
into effect from 01.04.2021 thereby transforming into a non-obstante
clause, cannot be said to have been excluded by implication from the
ambit of the MPID Act, in view of the definition of 'Financial
Establishment' contained in Section 2(d) of the MPID Act.
25. True it is that any co-operative bank registered under the
Central or State legislature to which provisions of BR Act are applicable,
would be under supervision of the RBI. However, one cannot lose site of
the fact that the BR Act merely seeks to have a control over the
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functioning of all the banking companies or the co-operative banks,
however, it does not contain any specific provision defining any act or
provide for any punishment for the offences which are punishable under
Section 409, 420, 467, 468 and 471 read with Section 34 of the Indian
Penal Code. Only some acts have been made punishable by making the
offences cognizable as mentioned in Section 47.
26. Consequently, it cannot be said that the purpose for which
MPID Act has been brought in the statute book stands served by bringing
the co-operative banks registered under the State legislature within the
sweep of the BR Act. Both these enactments operate in different spheres.
27. With respect, the line of reasoning we have resorted to gets
corroboration from a similar view taken by the Supreme Court in the
matter of Soma Suresh Kumar Vs. Govt. of A.P.; (2013) 10 SCC 677.
28. In view of the above, the Criminal Writ Petition is dismissed.
Pending criminal applications are disposed of. Rule is discharged.
[ SHAILESH P. BRAHME ] [ MANGESH S. PATIL ]
JUDGE JUDGE
habeeb
