Judgment apl673.21.odt 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH, NAGPUR CRIMINAL APPLICATION APL NO.673/2021 Shukul s/o Dharmaji Makde, Aged about: 63 years, occupation: retired, r/o plot No.36, Near Modern School, Bokhara, tahsil and district: Nagpur. ….. Applicant. :: V E R S U S :: 1. State of Maharashtra, Through Police Station Officer, Khaperkheda, tahsil: Saoner, district Nagpur. 2. Vivek Kamlakar Huddar, (Govt.auditor), aged 52 years, occupation Service, r/o plot No.202, Ramnagar, Nagpur. ….. Non-applicants. ============================== Shri S.G.Karmarkar, Counsel for the Applicant. Mrs.M.A.Barabde, APP for Non-applicant No.1/State. ============================== CORAM : URMILA JOSHI-PHALKE, J. CLOSED ON : 09/02/2026 PRONOUNCED ON : 17/02/2026 JUDGMENT 1. Heard learned counsel for the applicant and learned APP for the State. Admit. Heard finally by consent. .....1/- 2026:BHC-NAG:2762-DB Judgment apl673.21.odt 2 2. By this application, the applicant is seeking quashing of FIR in connection with Crime No.301/2020 registered for offences under Sections 403, 406, 409, 467, 468, 471, 477-A of the IPC and 3 and 4 of The Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (the MPID Act) and consequent proceeding arising out of the same bearing Special MPID Case No.26/2022 pending before learned District Judge-15 and Special Court under MPID Act, Nagpur. 3. Facts of the case in brief are as under: The crime is registered on the basis of an Audit Report of the year 2001-2018. The applicant was the Director of “Shri Santaji Nagari Sahakari Pat Sanstha Limited” (the said Society) which is a Registered Cooperative Society. The said Society is running Credit Cooperative Business. The applicant was one of founder Members of the said Society. As per allegations in the FIR, during the period of 2001-2018, .....2/- Judgment apl673.21.odt 3 during the Audit, it revealed that various irregularities and illegalities are committed by the Directors and Managers as well as Accountant. As per allegations, loans were disbursed without following due process and without obtaining approval from the entire body of the Directors. The “deposits” accepted from various investors are not returned back to them and the said “deposits” were transferred to other bank accounts. No action was taken for recovery of the amounts also and thereby loss is caused to the said Society to the tune of Rs.1,31,29,059/-. On the basis of the said report, the police have registered the crime against the applicant and other co- accused. 4. Learned counsel for the applicant submitted that as far as the applicant is concerned, there is no specific allegation that he was looking after day-to-day affairs of the said Society and he is responsible to disburse the loan .....3/- Judgment apl673.21.odt 4 amounts and transfer amounts either in his account or accounts of his relatives. The general allegation is levelled against all the Directors. In fact the applicant is serving in Western Coalfields Limited. He is not responsible for the day- to-day affairs of the said Society. Though Audit Report shows that there are various irregularities, by no stretch of imagination, it can be said that offence is committed under Section 409 or 406 of the IPC. Therefore, no offence is made out against the applicant. In view of that, the application deserves to be allowed. 5. Per contra, learned APP for the State strongly opposed the said contentions and invited my attention towards various activities conducted in the said Society. He submitted that public money involved in the said transactions was misused by the Board of Directors. Admittedly, the amounts were entrusted by various investors with the said Society and the said amounts were not returned to the .....4/- Judgment apl673.21.odt 5 investors, which is sufficient to disclose that there is criminal breach of trust. He invited my attention towards the Audit Report and submitted that in the Audit Report various irregularities are pointed out Eg. (i) entries were not taken as to “deposits,” (ii) daily “deposits” and loans were not disbursed by following due process, (iii) and no steps are taken to recover the said amounts. The various statements of witnesses disclose that they have deposited amounts which were not received by them. Thus, the entire Audit Report discloses that the entire Body of the Directors is responsible for the loss of the public money, which is sufficient to attract offences under Sections 403, 406, and 409 of the IPC. He submitted that, at this stage, there is a sufficient material to proceed against the applicant and, therefore, the application deserves to be rejected. .....5/- Judgment apl673.21.odt 6 6. On hearing both the sides and perusing the entire investigation papers, it reveals that involvement of the applicant is in economic offence. 7. Before adverting to the rival contentions, with reference to the application under Section 482 of the CrPC, it would be appropriate to refer legal principles in respect of scope of exercise of powers under Section 482 of the CrPC. 8. In the case of Paramjeet Batra vs. State of Uttarakhand and ors, reported in (2013)11 SCC 673, the Hon’ble Apex Court held, as under: “While exercising its jurisdiction under Section 482 of the Code the High Court has to be cautious. This power is to be used sparingly and only for the purpose of preventing abuse of the process of any court or otherwise to secure ends of justice. Whether a complaint discloses a criminal offence or not depends upon the nature of facts alleged therein. Whether .....6/- Judgment apl673.21.odt 7 essential ingredients of criminal offence are present or not has to be judged by the High Court. A complaint disclosing civil transactions may also have a criminal texture. But the High Court must see whether a dispute which is essentially of a civil nature is given a cloak of criminal offence. In such a situation, if a civil remedy is available and is, in fact, adopted as has happened in this case, the High Court should not hesitate to quash criminal proceedings to prevent abuse of process of court.” 9. In the decision in the case of State of Haryana and ors vs. Bhajan Lal and ors, reported in 1992 Suppl.(1) SCC 335, after considering various decision and statutory provisions, the Hon’ ble Apex Court has laid down following principles: “(i) where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute .....7/- Judgment apl673.21.odt 8 any offence or make out a case against the accused; (b) where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code; (c) where the uncontroverted allegations made in the FIR or ' complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused; (d) where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code; .....8/- Judgment apl673.21.odt 9 (e) where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused; (f) where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party; and (g) where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge”. .....9/- Judgment apl673.21.odt 10 10. In the light of the above principles, if facts of the present case are taken into consideration, it shows that the applicant was the Director of the said Society, which is a registered cooperative institute. It is alleged that during the Audit Report of the year 2001-2018, the Directors and the Managers, in connivance with each other, have committed irregularities and illegalities. As per the allegations, the transactions regarding the loan repayment, were not recorded properly. The entries regarding the “deposits”, accepted through agents against daily “deposits”, are not maintained. It further revealed that the “deposits” deposited by the various investors, even after maturity period, were not returned to the investors and the same amounts were misappropriated. It further revealed during the Audit Report that various illegalities are committed by transferring amounts in accounts of investors and, thereafter, the said amounts were misappropriated. Thus, during the Audit, it revealed that total amount of misappropriation is Rs.1,31,29,059/-. .....10/- Judgment apl673.21.odt 11 During the investigation, the investigating officer has recorded various statements of witnesses. The statement of Auditor i.e. informant shows that he has specifically stated manner in which the misappropriation is committed by the Body of Directors, Managers, and Accountant. The statement of Sangpal Telang also corroborates the same and it specifically states that as the Directors have not kept proper control on the transactions, the Manager, Cashier, and various Directors have misappropriated the amounts and caused loss to the said Society. The statements of various investors are also recorded, which also show that though they have invested the amounts in Fixed Deposits, on maturity period, when they have demanded the amounts, the amounts were not received by them and they have lost their amounts. Their statements specifically show that the Board of Directors and the .....11/- Judgment apl673.21.odt 12 employees of the said Society have misappropriated the said amounts. 11. Thus, involvement of the applicant in the alleged incident appears to be there. 12. At this stage, a mini trial is not to be conducted. 13. What is required to be seen is that, whether there is a sufficient material to force the applicant to face trial. 14. The Audit Report and various statements of witnesses including statement of Auditor disclose involvement of all the Directors. 15. Learned counsel for the applicant submitted that provisions of Sections 3 and 4 of the MPID Act are not applicable as allegations levelled against the applicant .....12/- Judgment apl673.21.odt 13 nowhere show that the “deposits” with the said Society are misappropriated. 16. Clause(c) of Section 2 of the MPID Act defines ' deposit' as under : "(c) "Deposit" means the deposit of money either in one lump sum or by installments made with the Financial Establishment for a fixed period for interest or for return in any kind or for any service and includes and shall be deemed always to have included any receipt of money or acceptance of any valuable commodity by any Financial Establishment to be returned after a specified period or otherwise, either in cash or in kind or in the form of specified service with or without any benefit in the form of interest, bonus, profit, or in any other form, but does not include— (i) amount raised by way of share capital or by any way of debenture, bond or any other instrument covered under the guidelines given, .....13/- Judgment apl673.21.odt 14 and regulations made, by the SEBI, established under the Securities and Exchange Board of India Act, 1992 (15 of 1992) ; (ii) amounts contributed as capital by partners of a film; (iii) amounts received from a Scheduled bank or Shraddha Talekar PS Co-operative Bank or any other banking company as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949 (10 of 1949); (iv) any amount received from— (a) the Industrial Development Bank of India; (b) a State Financial Institution; (c) any financial institution specified in or under section 6-A of Industrial Development Bank of India Act, 1964 (18 of 1964) ; or (d) any other institution that may be specified by the Government in this behalf; .....14/- Judgment apl673.21.odt 15 (v) amounts received in the ordinary course of business by way of – (a) security deposit; (b) dealership deposit; and (c) earnest money; (vi) any amount received from an individual or a firm or an association or individuals not being a body corporate, registered under any enactment relating to money lending which is for the time being in force in the State ; and (vii) any amount received by way of subscriptions in receipt of a Chit. Explanation I -- "Chit" has the meaning as assigned to in clause (b) of Section 2 of the Chit Funds Act, 1982 (40 of 1982); Explanation II .-- "Any credit given by a seller to a buyer on the sale of any property (whether movable or immovable) shall not be deemed to be a deposit for the purposes of this clause." .....15/- Judgment apl673.21.odt 16 Whereas clause (d) of Section 2 defines "Financial Establishment" as: "(d) Financial Establishment" means any person defined under clause (c) of Section 5 of the Banking Regulation Act, 1949 (10 of 1949)." 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 defined under clause (c) of Section 5 of the Banking Regulation Act, 1949 (10 of 1949)." 17. Thus, definitions of ' deposit' and ' financial establishment' are rather expansive. The inclusive definition of ' deposit' covers any receipt of money or acceptance of any valuable commodity, except those amounts which have been specifically excluded by sub-clauses (i) to (vii) thereof. Thus, any person accepting deposits under any scheme or in any other manner satisfies the description of financial establishment except a corporation or a co-operative society .....16/- Judgment apl673.21.odt 17 owned or controlled by any State Government or the Central Government or a banking company defined under the Banking Regulation Act. 18. In the present case, admittedly, the said Society, a cooperative institute, registered under the Cooperative Societies Act, is running a financial establishment and statements of witnesses disclose that they have collected “deposits.” 19. Learned counsel for the applicant submitted that the entire controversy revolves around question as to whether loan amounts given to various investors are within the definition of “deposit.” 20. The Hon’ble Apex Court, in the case of State of Maharashtra vs. 63 Moon Technologies Limited, reported in (2022)9 SCC 457, dealt with the scope and ambit of “deposit” and “financial establishment” and held as under: .....17/- Judgment apl673.21.odt 18 “(i) the expression ' deposit' is conspicuously broad in its width and ambit for it includes, not only any receipt of money but also the acceptance of any valuable commodity by a financial establishment under any scheme or arrangement; (ii) the money or commodity must be liable to be returned. However, such return need not necessarily be in the form of cash or kind but also in the form of a service, with or without any benefit such as interest; (iii) it is not necessary that the return should be with the benefit of interest, bonus or profit. Therefore, 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 exceptions; (iv) 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, and .....18/- Judgment apl673.21.odt 19 (v) the definition is broadly worded to include even the possession of the commodities for a limited purpose.” Thus, expression ' deposit' is conspicuously broad in its width and ambit for it includes, not only any receipt of money but also the acceptance of any valuable commodity by a financial establishment under any scheme or arrangement. The expression ‘any’ is used in the substantive part of the definition of the expression ' deposit' on five occasions namely; “i) Any receipt of money; (ii) Any valuable commodities; (iii) By any financial establishment; (iv) With or without any benefit; and (v) In any other form. The Hon’ble Apex Court further explains that there is nothing in the definition of the term “deposit” to mean that the acceptance of the commodity should be accompanied by a transfer of title to the commodity. Even if the financial establishment is only in “custody” of the commodity, it would .....19/- Judgment apl673.21.odt 20 still fall within the purview of the phrase “acceptance of commodity”. According to the second ingredient of Section 2(c), the money or commodity must be liable to be returned. However, such return need not necessarily be in the form of cash or kind but also in the form of a service, with or without any benefit such as interest. It needs to be recalled that clause (v) of Section 2(c) states that a deposit of money or commodity made as a security deposit, dealership deposit or an advance amount is excluded from the definition of the phrase “deposit”. 21. On going through the entire record and investigation papers, especially statements of witnesses, it reveals that various investors have deposited the amounts. Admittedly, the said amounts are to be returned on maturity period. It reveals that daily deposits are also accepted by the said .....20/- Judgment apl673.21.odt 21 Society, which are also, admittedly, to be returned back to the investors. 22. Thus, the entire investigation papers show that amounts are obtained by way of “deposits” from the various investors and, therefore, the same are required to be repaid by the said Society. Therefore, it would amount to “deposit” within the meaning and for the purpose of MPID Act. 23. The object of the MPID Act is only to protect the interests of small depositors from fraud perpetrated on unsuspecting investors, who entrusted their life’ s savings to unscrupulous and fraudulent persons and who ultimately betrayed their trust. The said enactment was enacted to protect the interests of small depositors from fraud. The nature of legislation is to protect the interests of small depositors, who invest their life’ s earnings and savings in schemes for making profit floated by unscrupulous individuals and companies, both incorporated and unincorporated which .....21/- Judgment apl673.21.odt 22 needs to be kept in mind while testing the provisions of the MPID Act. 24. On going through the definition of “financial establishment”, admittedly, the applicant, who was the Director and responsible for the day-to-day affairs of the Society, accepted the amounts from the various investors and disbursed the loan amount which is public money and has not taken steps to recover the same. It is not a simple breach of trust but it is an offence under breach of trust contemplated under Section 403 of the IPC. 25. For the criminal breach of trust, the property must have been entrusted to the accused or he must have dominion over it. The property in respect of which the offence of breach of trust has been committed must be either the property of some person other than the accused or the beneficial interest in or ownership' of it must be of some other person. The accused must hold that property on trust of such other person. .....22/- Judgment apl673.21.odt 23 Although the offence, i.e. the offence of simple breach of trust and the offence of criminal breach of trust, there is a distinction. To attract the offence of criminal breach of trust, there has to be entrustment of the property and the same being dishonestly misappropriate. In other words, in case of criminal breach of trust, the offender/accused is lawfully entrusted with property and he has dishonestly misappropriated the same. 26. Admittedly, the amounts invested with the said Society of which the applicant was the Director are the public money. The involvement of the applicant appears to be there in misappropriation of the public money. 27. The Hon’ble Apex Court, in the case of State of Gujarat vs. Mohan Lal Jitamalji Porwal, reported in (1987)2 SCC 364 held as follows: .....23/- Judgment apl673.21.odt 24 “5. ….The entire community is aggrieved if the economic offenders who ruin the economy of the State are not brought to book. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the community. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even-handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the national economy and national interest…..” 28. The Hon’ble Apex Court, while dealing with offence, involving conspiracy to commit economic offences of huge magnitude, in the case of Y.S.Jagan Mohan Reddy vs. CBI, reported in (2013)7 SCC 439 laid down following parameters: .....24/- Judgment apl673.21.odt 25 “i) economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country, and ii) while granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interest of the public/State and other similar considerations.” 29. By applying the principles laid down by the Hon’ble Apex Court to the present case, while quashing the FIR, a .....25/- Judgment apl673.21.odt 26 prima facie material is there to connect the applicant with the alleged crime and, therefore, this is not a fit case wherein powers under Section 482 of the CrPC are to be exercised. 30. For the above reasons mentioned, the application deserves to be rejected and the same is rejected. Application stands disposed of. (URMILA JOSHI-PHALKE, J.) !! BrWankhede !! .....26/-