The Madras High Court has quashed a case booked by Economic Offences Wing against IL&FS Transportation Networks India Limited (ITNL) and its former directors under the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act of 1997.
Justice M. Dhandapani quashed the case on the technical grounds that neither ITNL could be described as a ‘financial establishment’ nor the debentures floated by it could be termed as ‘deposits’ as defined under the TANPID Act aimed at protecting gullible depositors.
The judge pointed out that the intention behind the 1997 enactment was primarily to protect middle class depositors from the clutches of fraudulent financial establishments that promise higher interest rates but end up swindling the deposits without refunding them.
In the present case, the debentures had been issued at a face value of Rs.10 lakh and they were primarily aimed at corporates who were well aware of the nuances of such business transactions and the risks associated therewith. Therefore, the debentures would not fall within the definition of deposit under the TANPID Act, the judge held.
He, however, refused to quash the case with respect to IL&FS, the parent company which was facing a probe by Serious Fraud Investigation Office (SFIO) for economic offences to the tune of Rs.91,000 crore. Since IL&FS was not before the court, the judge confined the order with respect to three former directors of ITNL.
Ravi Parthasarathy, Hari Sankaran and Ramchand Karunakaran had approached the court with a plea to quash the TANPID case against them.
“This court, by quashing the case relating to TANPID Act, by no stretch, is giving a clean chit to the petitioners herein as persons who are beyond pale of doubt,” the judge said and observed that purchasers of ITNL debentures could approach the SFIO which was conducting a comprehensive probe of the economic offence.
