SC Holds a 'Loan' Can Be a 'Deposit' Under the MPID Act

Welcome to this week’s issue of the Indian Legal Brief (ILB). Here are the judgments, orders, regulatory changes, and developments that matter to your practice — without the noise.

Here’s what happened this week.

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Supreme Court Highlights

Sabarimala Reference: Nine-Judge Bench Reserves Verdict After 16 Days

Bench: CJI Surya Kant, Justices B.V. Nagarathna, M.M. Sundresh, Ahsanuddin Amanullah, Aravind Kumar, Augustine George Masih, Prasanna B. Varale, R. Mahadevan, and Joymalya Bagchi — May 14, 2026

The nine-judge Constitution Bench reserved its verdict in the Sabarimala reference on May 14, 2026, after sixteen days of oral hearings that began on April 7. The Bench heard parties supporting and opposing the 2018 judgment, the amicus, and counsel for the tagged matters — Parsi excommunication, Dawoodi Bohra excommunication, the right of Muslim women to enter mosques and dargahs, and the practice of female genital mutilation.

The reference covers seven framed questions on the scope of Articles 25 and 26, the essential religious practices test, and the meaning of “morality” in those provisions. The Bench is also expected to address whether non-believers can challenge a religion’s practices through PIL.

Why it matters: The verdict — whenever pronounced — will restate the entire Articles 25–26 framework, not just the Sabarimala question. Counsel in any pending personal-law or denominational-autonomy matter should prepare to re-pleat their petitions against the new framework. The 66 tagged matters will move forward in the months that follow.

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MPID Act: “Loan” Can Be “Deposit”; Private Individuals Can Be “Financial Establishments”

May 15, 2026

The Supreme Court held that money advanced as a “loan” can qualify as a “deposit” under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 — if the underlying transaction satisfies the statutory ingredients. The Court emphasised that:

“It is not the nomenclature but the ingredients or the basic attributes with which the transaction is informed and characterised that would make and mould the transaction to become ‘deposit’ under Section 2(c) of the MPID Act.”

The Bench also held that the definition of “Financial Establishment” in Section 2(d) — which uses “any person accepting deposit” and “in any other manner” — is broad enough to cover private individuals, not just registered entities. Money advanced by an individual to a debtor with a promise to return with interest can be legally treated as a deposit, even if the parties describe it as a loan.

Why it matters: Recovery, white-collar, and IBC practitioners should re-examine the architecture of disputes that have so far been framed as “private loan” matters: the MPID Act’s attachment, restitution, and criminal-prosecution machinery may now be available where the underlying transaction looks like a deposit in substance. Drafting choice of words in MoUs and loan agreements no longer immunises the transaction from MPID scrutiny.

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Hindu Succession Act: 2005 Amendment Does Not Limit Daughters’ Pre-Existing Section 8 Rights

Bench: Justices Sanjay Karol and Augustine George Masih — May 15, 2026

In a suit by three daughters seeking partition of their late father’s five properties (the father, B.M. Seenappa, died intestate on March 6, 1985, leaving a widow, three daughters, and four sons), the Supreme Court held that Section 6(5) of the Hindu Succession Act does not bar a daughter’s suit for partition seeking inheritance rights as a Class I heir under Section 8.

The Court read Section 6(5)‘s reference to “nothing contained in this section” as confined to the new coparcenary rights introduced by the 2005 substituted Section 6. It does not extinguish pre-existing Section 8 rights of Class I heirs, which accrued independently of the 2005 Amendment. A partition carried out among the sons alone cannot defeat the daughters’ inheritance in the father’s share.

Why it matters: Family-law and property-litigation practitioners handling intestate-succession matters from pre-2005 deaths — especially where partition deeds were executed only between sons — should audit pending and stale matters. Daughters’ Section 8 rights survive any such “internal” partition, and a fresh suit for partition is maintainable.

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Illegal Sand Mining in Chambal Sanctuary: SC Summons Rajasthan Top Officials

May 14, 2026

In In Re: Illegal Sand Mining in the National Chambal Sanctuary and Threat to Endangered Aquatic Wildlife, the Supreme Court called the Rajasthan Government’s conduct “wholly casual, indifferent, and indolent,” and summoned five senior bureaucrats to be personally present on May 20 with detailed compliance affidavits:

• Additional Chief Secretary (Home)
• Principal Secretary (Mining)
• Principal Secretary (Finance)
• Principal Secretary (Forest)
• Principal Secretary (Transport)

The Court warned that any further inaction would attract personal accountability and contempt proceedings, and expanded the scope to include the National Highways Authority of India after being informed that illegal excavation was occurring beneath the pillars of NH-44 at the Morena–Dholpur border.

Why it matters: This is one of the more aggressive enforcement postures the Court has taken on environmental compliance this year. Counsel acting for State governments and PSU project proponents on pending environmental matters should expect personal-presence directions to become more common, and should pre-file compliance evidence rather than wait to be summoned.

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Criminal Law: Hostile Witnesses Can Support Acquittal

May 13, 2026

The Supreme Court acquitted a man accused of killing a member of a Scheduled Caste / Scheduled Tribe community, holding that the evidence of hostile witnesses can be used not only to support a conviction (long settled) but also to discredit the prosecution case and support acquittal. Where the hostile witness’s testimony aligns with the defence narrative on material particulars and the prosecution’s case otherwise rests on weak or contradicted evidence, the Court may rely on the hostile portion in favour of the accused.

Why it matters: Criminal defence counsel handling appeals — particularly in conviction matters where a key prosecution witness turned hostile and the trial court treated the entire testimony as unreliable — should consider a fresh look at whether portions favourable to the accused were given due weight.

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Other Notable SC Orders This Week

• NCLT President’s transfer power — A Bench comprising CJI Surya Kant and Justice Joymalya Bagchi is examining whether the NCLT President’s Rule 16(d) power to transfer cases between Benches extends across States (testing a Gujarat High Court ruling that confined it intra-State). The CJI also pulled up benches that recused in the face of litigant pressure, observing that “a party which threatens a tribunal can’t get away with it.”
• NCLT delays (suo motu) — The April 29 suo motu order remains placed before CJI Surya Kant for Bench assignment; no listing this week.
• ED v. Mamata Banerjee — Maintainability arguments continued; no final ruling.
• Sabarimala IYLA standing — Carried into the reserved-verdict bundle; the original PIL’s standing question may be touched in the disposition.

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Insolvency & Corporate

NCLT President’s Power to Transfer Cases — Bench Composition Implications

The CJI-Bagchi Bench’s framing — that recusal in the face of pressure is the wrong response, and the President should transfer cases instead — has practical implications for resolution applicants and counsel in high-stakes CIRPs (the matter arose in the ArcelorMittal context where Ahmedabad benches recused and the President transferred to Mumbai). Counsel should factor in inter-State transfer risk when planning forum strategy.

Why MPID Act Matters in IBC Practice

With this week’s MPID ruling expanding the Act’s reach to private individuals and “loans” that look like “deposits,” the attachment / restitution machinery may interact more often with corporate insolvency proceedings. Where attached funds are sought under MPID and the corporate debtor is in CIRP, IPs and RPs should anticipate Designated Court vs. NCLT jurisdictional contests akin to the National Spot Exchange Limited line.

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What We’re Watching Next Week

• Sabarimala verdict — Reserved; date of pronouncement awaited
• Chambal sand mining — May 20 personal-presence hearing of five Rajasthan Principal Secretaries
• NCLT President’s transfer power — Further hearing on the cross-State transfer question
• NCLT delays (suo motu) — Bench assignment by the CJI
• ED v. Mamata Banerjee — Maintainability ruling

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That’s all for this week. If a colleague would find this useful, forward them this page — or better yet, ask them to subscribe.