The court ruled that cooperative banks fall within the definition of 'Financial Establishment' under the MPID Act, thereby affirming the Act's applicability to such entities despite their regulation under banking laws.

JUDGMENT :

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 3 4 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 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 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 INDIA