MPID Act and Flat Purchasers: Bombay High Court Refuses to Quash Criminal Proceedings Against Builders

Case: XYZ & Anr. v. State of Maharashtra & Anr.

Court: Hon’ble Bombay High Court

Date of Judgment: 1 October 2026

Introductory Facts

In a significant judgment concerning the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (MPID Act), the Bombay High Court refused to quash criminal proceedings against builders accused of allegedly selling the same areas of flats to multiple purchasers and relying on fabricated building plans. I appeared for the intervenors, who were among the flat purchasers claiming to be victims of the alleged fraud. The judgment examines the applicability of the MPID Act to amounts paid by flat purchasers and underscores the importance of hearing victims before criminal proceedings are terminated.

Submissions by the Parties

The builders argued that the dispute was essentially contractual and that payments made by flat purchasers could not be treated as deposits under the MPID Act. They contended that the criminal proceedings were an attempt to give a civil dispute the colour of a criminal offence.

The complainant and the intervenors opposed quashing. It was submitted that the builders had allegedly relied on false and fabricated plans, accepted substantial payments without requisite approvals, and subsequently carved out portions of flats and terraces already allotted to existing purchasers, reselling those areas to third parties. The intervenors also highlighted that quashing the FIR on the basis of a settlement with one complainant could leave other affected purchasers without an effective criminal remedy.

The State supported the prosecution, pointing out that eight flat purchasers had allegedly paid a total of approximately ₹7.39 crore and that their statements formed part of the investigation.

Observations of the Hon'ble Court

1. Flat purchase payments can fall within the MPID Act

Rejecting the contention that the MPID Act was inapplicable, the Court relied on Manohar Bhimji Mahale v. State of Maharashtra (2020 SCC OnLine Bom 368). The Court reiterated that amounts paid by flat purchasers to a financial establishment may fall within the statutory definition of “deposit”. The exceptions to that definition were held inapplicable to such flat-purchase transactions in the precedent relied upon.

On the facts before it, the Court found a prima facie case under the MPID Act, considering the alleged fraudulent default and the builders’ conduct.

2. Alleged double sale of flats cannot be dismissed as a mere contractual dispute

The Court noted that substantial amounts had been accepted for flats and areas that were allegedly carved out of previously allotted units and resold to other purchasers. The municipal authority had also indicated that the disputed plan had not been issued by it and did not bear the competent authority’s signature.

The Court held that the allegations, taken with the material on record, prima facie disclosed serious offences, including cheating and forgery. The builders’ defences were matters to be examined at trial.

3. Victims have a right to be heard

Relying on the Supreme Court’s judgment in Jagjeet Singh v. Ashish Mishra (2022) 9 SCC 321, the Court recognised the intervenors as affected persons entitled to participate in the proceedings. It observed that victims need not remain silent spectators and may be heard, including through the public prosecutor or by assisting the prosecution.

This was particularly significant because a settlement with one complainant could not, by itself, resolve the grievances of other alleged victims.

4. Civil remedies do not automatically bar criminal proceedings

The Court clarified that pursuing civil remedies or proceedings before the regulatory authorities does not automatically render criminal proceedings unsustainable. Where the facts prima facie disclose criminal offences, civil and criminal remedies may proceed independently.

The Court also took note of the builders’ alleged suppression of material facts, non-compliance with court orders and failure to honour consent terms while considering whether discretionary relief was warranted.

Ultimately, the Bombay High Court dismissed the writ petition, holding that no case had been made out for exercising its inherent powers to quash the criminal proceedings.

The takeaway: The judgment reinforces that payments made by flat purchasers may attract the protection of the MPID Act where its statutory requirements are satisfied. Allegations of double allotment, unauthorised resales and fabricated plans must be examined on their merits; they cannot be brushed aside merely by characterising the dispute as contractual. Equally, the rights of affected flat purchasers deserve consideration before criminal proceedings are brought to an end.