High-Interest Loans Can Be Deposits Under MPID Act

The Supreme Court has held that amounts advanced as loans, when coupled with a promise of 24% annual interest, can fall within the definition of “deposit” under Section 2(c) of the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999.

The appeal arose from a dispute in which the appellants said they had advanced Rs. 2.51 crore to respondent Nos. 2 to 6 for a resort project at Tadoba, Maharashtra. According to the appellants, the money was paid through cheques and bank transfers on the assurance that it would carry interest at 24% per annum, payable quarterly in advance, and would be repaid by 31.12.2019. The respondents admitted receipt of the amounts, but denied liability to pay interest or repay by any fixed date.

The appellants pursued multiple remedies, including legal notices, police complaints, summary suits, and proceedings seeking registration of an FIR. They later invoked the MPID Act and sought registration of an offence under Section 3. The Sessions Court rejected that request, and the High Court dismissed the revision, treating the transaction as a loan of civil character and holding that the respondents were not “financial establishments” under the Act.

The Supreme Court disagreed. It examined the substance of the transaction and held that the amounts lent by the appellants satisfied the essentials of Section 2(c) read with Section 2(d) of the MPID Act. The Court concluded that the recipients of the money assumed the character of a “financial establishment” for the purposes of the statute.

The Court also rejected the High Court’s reasoning that the matter was purely civil, and held that failure to establish offences under the IPC did not bar a complaint under the MPID Act. Once the statutory ingredients were met, the appellants were entitled to invoke Section 3 and pursue remedies under the Act.

The judgment sets aside the High Court’s order dated 14.08.2025 and restores the appellants’ ability to proceed under the MPID Act.

Practical takeaway: Courts will look at the real nature of the transaction, and a loan with assured high returns may still attract the MPID Act.