Mumbai: Observing that equitable and equal are two different concepts, the Bombay high court on Monday quashed two orders passed by a special court that had ordered the Maharashtra government to equally distribute the amount recovered by selling the assets of accused in the NSEL scam. The HC has ordered the government to distribute the amounts of Rs 40 crore and Rs 35 crore to around 6,445 investors, who have investments between Rs 2 lakh and Rs 10 lakh.
A bench of Justices Sambhaji Shinde and Manish Pitale said the special court erred in interpreting the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999, by ordering the equal distribution of Rs 35 crore to over 12,000 investors - the total number of those who were duped.
The bench was seized with the plea filed by the Maharashtra government through the competent authority under the MPID law, challenging the two orders of the special court by which it had ordered equal distribution of Rs 35 crore and Rs 40 crore to the 12,000 plus investors.
The state argued that the special court had discretionary powers under the MPID law to distribute the amounts in a graded manner, instead of equally dividing it.
Notably, in August 2018, the Union Government had asked the competent authority under the state to seek equitable distribution of Rs 35 crore. The request was turned down by the special court. Then by another order, the special court refused to allow equitable distribution of Rs 40 crore.
Having noted the contentions, the judges accepted the state's argument that distributing the amounts thus would result in every investor getting a minuscule amount.
"If the amounts are equally distributed, the amounts that would be paid to each investor would be in a small proportion, thereby leading to a situation where none of the investors would get any substantial amount," the bench said.
"We are of the opinion that the said approach adopted by the special court cannot be said to be in consonance with the objects and reasons of the MPID Act," the judges held, while noting that the MPID law deals with the crisis faced by the middle class and poor depositors, who stand duped by the promise of unprecedentedly high, attractive interest rates on deposits.
The judges, while referring to the definition of equitable and equal as per the Black Law's Dictionary, noted that 'equitable’ is defined as just, consistent with principles of justice and right.
The judges further noted the fact that there were 6,445 investors in the Rs 2 lakh to Rs 10 lakh category, who were to be paid over Rs 345 crore, while around 5,600 investors within the slab above the Rs 10 lakh deposits, with outstanding amounts of Rs 5,048 crore.
Accordingly, the bench ordered the state to distribute the Rs 40 crore to 6,445 investors and the amount, if anything remained from the Rs 35 crore to the same category of investors.