MPID Court Discharges 3 Businessmen In 24-Year-Old Investment Fraud Case

Mumbai: Twenty-four years after the Mumbai police booked three businessmen for operating an investment business but failing to return funds to the investors, the special Maharashtra Protection of Interest of Depositors (MPID) court discharged them, holding that the provisions of the Act are not applicable to the case and that the trio had no intention to cheat the investors.

About The Case

The special MPID judge, NG Shukla, last week disposed of one of the oldest pending cases of alleged investment fraud. The businessmen discharged are Mukesh Mehta and Nilesh Parekh, both now 66 years old, and Dhansukh Shethia, now aged 74. The court has ordered that the amount of Rs 6.06 lakh, allegedly the outstanding sum owed to investors and recovered by the police, be kept in a fixed deposit in case any of the remaining investors approach the court to claim funds.

As per the prosecution’s case, the three were directors of M/s Enrai Finance Ltd. It was alleged that they introduced various fixed deposit (FD) schemes and collected investments amounting to Rs 46 lakh from 215 investors, promising lucrative interest on maturity. The schemes varied in duration, ranging from 18 months to three years. When they failed to return the funds, the case was registered with the Economic Offences Wing of the Mumbai police.

While seeking discharge, the three businessmen claimed that the company had accepted FD investments prior to 1997, with maturity dates before 1999. The Reserve Bank of India (RBI) issued a circular effective January 2, 1998, prohibiting Non-Banking Financial Companies (NBFCs) from accepting further deposits. It was contended that while the firm was in the process of clearing dues, a company petition was filed.

By order dated April 26, 1999, an official liquidator was given control of the company. Further, it was argued that the alleged offence occurred before the MPID Act came into force on April 29, 1999. They contended that due to the RBI circular and the appointment of the liquidator, the money was not returned to investors.

Moreover, the company had been paying interest to depositors for 12 years prior to 1997, they argued. After examining the case, the court concluded that the provisions of the Act are not applicable, as all the FDs matured by 1998, well before the Act came into existence.