MPID Attachment Stands Despite IBC Moratorium Plea

The Bombay High Court dismissed a criminal appeal under Section 11 of the Maharashtra Protection of Interest of Depositors in Financial Establishments Act, 1999, and upheld the order refusing to stay MPID proceedings on the basis of an interim moratorium under the Insolvency and Bankruptcy Code, 2016.

The appeal arose from Misc. Application No.151/2020 in MPID Special Case No.1/2014, where the Competent Authority sought attachment of the appellant’s properties under Section 8 of the MPID Act. The appellant, M/s. Dulisons Cereals through its proprietor Smt. Kanta Gupta, argued that an insolvency application had been filed against her before the NCLT under Section 95(1) of the IBC, and that an interim moratorium under Section 96 had therefore commenced. On that basis, she contended that the MPID proceedings should be stayed.

The State and NSEL opposed the request. Their case was that the MPID attachment was not a debt recovery action against the appellant. It was a protective measure to safeguard depositors. They also pointed to the forensic audit material, which showed a money trail of about Rs. 13.60 crores from M/s. PD Agro Processors Pvt. Ltd. to the appellant. According to the record, PD Agro had traded on the NSEL platform and had substantial liabilities arising from those transactions.

The Division Bench of Justice A.S. Gadkari and Justice Shyam C. Chandak accepted the respondents’ position. The Court held that the appellant could not use Section 96 of the IBC to stall proceedings under the MPID Act, because the attachment in question was aimed at depositor protection and not at enforcing a debtor-creditor claim. The Court also noted the direct money trail from PD Agro to the appellant, which supported the attachment action under the MPID framework.

The appeal was dismissed with costs of Rs. 10,00,000. The Court directed that the amount be paid to the Bar Council of Maharashtra and Goa’s Advocate Academy and Research Center within four weeks. The request to continue the ad-interim relief for four weeks to enable a challenge before the Supreme Court was also rejected.

Practical takeaway: an interim moratorium under the IBC will not automatically stop MPID attachment proceedings where the action is directed at protecting depositors rather than recovering a debt.