The Supreme Court held that money advanced as a “loan” may still constitute a “deposit” under the MPID Act if it satisfies the statutory ingredients of receipt, returnability, and promised benefit, and that failure to establish IPC offences does not bar independent proceedings under the MPID Act.

on

Facts

The appellants, comprising members of a family and two companies, advanced approximately Rs. 2.51 crore to respondent Nos. 2–6 between 2016 and 2019 for development of a resort project at Tadoba, Maharashtra. The respondents allegedly promised repayment with 24% annual interest payable quarterly.

The respondents neither repaid the principal nor paid interest. Legal notices were issued, and several civil and criminal proceedings followed, including proceedings under ss. 420, 409, 405 read with s. 34 IPC and complaints under s. 138 NI Act. Courts earlier treated the transaction as a civil “loan transaction” and declined to direct registration of FIRs under the IPC.

Subsequently, the appellants invoked the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (MPID Act) and sought registration of an FIR under s. 3 MPID Act. The Sessions Court and Bombay High Court rejected the plea, holding that the amounts constituted loans rather than “deposits” and that the respondents were not “financial establishments” under the Act.

Issues Framed
Whether the amounts advanced by the appellants constituted “deposit” under s. 2(c) MPID Act and whether respondent Nos. 2–6 fell within the definition of “financial establishment” under s. 2(d) MPID Act.

Court’s Reasoning

(a) The Court examined the scheme and object of the MPID Act, observing that it was enacted to protect depositors from fraudulent financial establishments collecting money on false assurances. The Act creates a self-contained quasi-criminal mechanism with both penal and remedial features.

(b) Interpreting s. 2(c) MPID Act, the Court emphasized the expansive language used in defining “deposit,” particularly the repeated use of the word “any.” Referring to State of Maharashtra v. 63 Moons Technologies Ltd., the Court held that the definition is intentionally broad and inclusive.

(c) The Court identified three essential ingredients of a “deposit”:
(i) receipt of money by a financial establishment;
(ii) obligation to return the money after a specified period or otherwise; and
(iii) return with or without benefit such as interest, profit, or bonus.

All these ingredients were found satisfied in the present case since the respondents admittedly received money with a promise of repayment and quarterly interest.

(d) The Court rejected the contention that the transaction was merely a “loan transaction.” It held that nomenclature is irrelevant and that even if parties describe the arrangement as a loan, it may still amount to a “deposit” if statutory ingredients are fulfilled.

(e) The Court further held that respondent Nos. 2–6 qualified as “financial establishments” under s. 2(d) MPID Act, which covers “any person accepting deposit under any scheme or arrangement or in any other manner.”

(f) The Court clarified that failure to establish offences under the IPC did not bar proceedings under the MPID Act. The MPID Act operates in a distinct statutory field with different ingredients and objectives. Thus, rejection of IPC allegations could not create an embargo against invoking remedies under the MPID Act.

Held
The amounts advanced by the appellants constituted “deposits” under s. 2(c) MPID Act, and respondent Nos. 2–6 were “financial establishments” within s. 2(d) MPID Act. The High Court’s judgment was set aside, and the appellants were held entitled to invoke remedies under s. 3 MPID Act.

Ratio
A transaction involving receipt of money repayable with or without interest constitutes a “deposit” under s. 2(c) MPID Act irrespective of its nomenclature as a loan, and persons accepting such money may constitute a “financial establishment” under s. 2(d) MPID Act

Case Details
Citation: 2026 INSC 489
Decided on: 15 May 2026
Case Title: Alka Agrawal and Others v. State of Maharashtra and Others
Court: Supreme Court of India
Bench: N.V. Anjaria, J. and Manoj Misra, J.