Any Financial Establishment, which fraudulently defaults any repayment of deposit on maturity along with any benefit in the form of interest, bonus, profit or in any other form as promised or fraudulently fails to render service as assured against the deposit, every person including the promoter partner, director, manager or any other person or an employee responsible for the management of or conducting of the business or- affairs of such Financial Establishment shall, on conviction, be punished with imprisonment for a term which may extend to six years and with fine which may extend to one lac of rupees and such Financial Establishment also shall be liable for a fine which may extend to one lac of rupees.

Explanation.- For the purpose of this Section, a Financial Establishment, which commits defaults in repayment of such deposit with such benefits in the form of interest, bonus, profit or any other form as promised or fails to render any specified service promised against such deposit, or fails to render any specific service agreed against the deposit with an intention of causing wrongful gain to one person or wrongful loss to another person or commits such default due to its inability arising out of impracticable or commercially not viable promises made while accepting such deposit or arising out of deployment of money or assets acquired out of deposits in such a manner as it involves inherent risk in recovering the same when needed shall be deemed to have committed a default Or failed to render the specific service, fraudulently.

Explanation to Sec. 3 deems certain acts as fraudulent. The common thread running through the acts specified therein is non-caring or non-taking a decision which a normal person ought to have taken while acting in his own case by balancing risks and returns. Section 23 of IPC defines "wrongful gain" to mean gain by unlawful means of property to which the person gaining is not legally entitled and "wrongful loss" to mean loss by unlawful means of property to which the person losing it is legally entitled. For either wrongful loss or gain, the property must be lost to the owner or the owner must be wrongfully kept out of it. If however person making deposits was aware of the deployment of money and about its commercial non-viability and still with full knowledge of risks attached thereto deposits the money then he could not later on complain about fraudulent act.

A plain reading of Sec. 3 does not indicate that it would constitute offence only if complaint is made by group of persons.

[See: Rajiv Ramanlal Shah v. Senior Inspector of Police General Branch & Others'. 2002 BCR(Cri) 593)]

It is possible to contend that offence is committed qua each default and if there are more than one deposit repayment default of then the fine at least should be in proportion to the number of default.

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