The Supreme Court has held that amounts advanced as loans may still qualify as “deposits” under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (MPID Act), if the ingredients of the statutory definition are satisfied.
The bench of Justice Manoj Misra and Justice N.V. Anjaria clarified that the nomenclature of a transaction is not decisive and that merely calling a transaction a “loan” cannot take it outside the protective framework of the MPID Act.
The ruling came in Alka Agrawal and Others v. State of Maharashtra and Others, where the Supreme Court allowed an appeal against a Bombay High Court judgment that had dismissed the appellants’ revision petition and imposed costs of ₹5 lakh upon them. The principal controversy before the Court was whether amounts advanced by the appellants to private individuals and entities could be considered “deposits” under Section 2(c) of the MPID Act.
The dispute arose from investments allegedly made between 2016 and 2019. Members of the Agrawal family and two companies claimed that they had been induced to invest money for establishing a resort project at Tadoba in Maharashtra after assurances of 24% annual interest payable quarterly. Acting on those representations, they collectively advanced approximately ₹2.51 crore through cheques and bank transfers to the respondents. The amount was allegedly promised to be repaid by December 2019. However, according to the appellants, neither the promised interest nor the principal sum was returned.
The litigation history was lengthy. The appellants first issued legal notices and pursued criminal remedies alleging offences such as cheating and criminal breach of trust. They also initiated civil proceedings for recovery. Earlier attempts to seek registration of FIRs under provisions of the IPC had failed, with courts taking the view that the transactions were essentially loan transactions and therefore civil disputes.
Subsequently, the appellants approached authorities under the MPID Act and sought registration of offences under Section 3 of the Act. Their application, however, was rejected by the Sessions Court and later by the High Court on the grounds that the transactions were loan arrangements, not deposits, and that the respondents did not constitute a “financial establishment.”
The Supreme Court disagreed with that approach and undertook a detailed examination of the MPID Act. The Court observed that the statute was enacted to protect investors from entities that collect money from the public on promises of attractive returns and later default. It noted that the Act contains a broad and inclusive definition of “deposit.”
Examining the statutory language, the Court observed that the definition of “deposit” includes any receipt of money by a financial establishment to be returned after a specified period with or without interest or any other benefit. The use of expressions such as “any receipt of money” and “in any other manner” reflected a legislative intention to cast a wide net.
The Court relied upon its earlier judgment in State of Maharashtra v. 63 Moons Technologies Ltd., where it had already emphasized the expansive nature of the definition. It noted that the legislature repeatedly employed the word “any” while defining both “deposit” and “financial establishment,” indicating an intention to avoid restrictive interpretations.
Applying these principles to the facts of the case, the Supreme Court found that all ingredients of the definition stood satisfied. The money had been received by the respondents, there was an understanding that the amount would be returned after a specified period, and there was a promise of payment of interest. Therefore, the transactions fell within the statutory meaning of “deposit.”
Importantly, the Court rejected the argument that the transactions should be treated purely as loan transactions. It observed that terminology alone does not determine legal character. According to the Court, even if the arrangement were described as a loan, it could still qualify as a deposit under the MPID Act if the statutory ingredients were present.
The Supreme Court also rejected the contention that because proceedings under IPC provisions had earlier failed, proceedings under the MPID Act could not be initiated. The Court emphasized that the MPID Act creates an independent statutory regime operating in a distinct field and that failure to establish offences under the IPC does not prevent invocation of remedies under the depositor protection legislation.
The Court ultimately held that the respondents, having accepted the amounts in question, assumed the character of a “financial establishment” under the MPID Act and that the appellants were entitled to invoke Section 3 of the statute. Accordingly, the High Court judgment was set aside and the appeal was allowed.
Case Details
Case Title: Alka Agrawal And Others Versus State Of Maharashtra And Others
Citation: JURISHOUR-1371-SC-2026
Case No.: SLP (Crl.) No. 19305 OF 2025
Date: 15/05/2026
