Mumbai Court Prioritizes Investors, Rejects SBI’s Plea to Seize Accused Firm’s Reserve Funds
The designated court under the Maharashtra Protection of Interest of Depositors (MPID) Act has ruled in favor of protecting duped investors, rejecting State Bank of India's (SBI) plea to seize over Rs 5.5 crore from a reserve fund to recover a loan from a company accused of fraud.
MumbaiMpid ActState Bank Of IndiaInvestor ProtectionFraudReal Estate MumbaiOct 02, 2025
Around 300 investors were cheated of Rs 4.1 crore more than a decade ago. Among the grounds, the court also considered that the bank had already recovered Rs 8 crore from the auction of another property. If the amount of Rs 3.5 crore is not released as per the prayer of the bank, it would be helpful to satisfy the claim of various depositors, some of whom are senior citizens. I find that the bank is not entitled to the relief of releasing the amount of Rs 5.51 crore, which includes the amount of Rs 3.5 crore and interest accrued thereon. The amount can be used to satisfy the claim of the depositors, special judge NG Shukla said.
The order directed SBI to transfer the entire amount of Rs 5.5 crore, including accrued interest, to the account opened by the Economic Offences Wing (EOW) in connection with the crime. In 2014, a case was registered against Peacock Media Ltd and its directors for offences including cheating and criminal breach of trust. The court was informed by the EOW that while the total fraud amount was Rs 4.1 crore, only a fraction was paid back, and the claims of 298 depositors were yet to be fully satisfied.
Allowing the bank's application would leave no sufficient amount to repay the depositors. SBI, through its Stress Assets Management Branch-II, filed a plea seeking permission to adjust Rs 3.5 crore, which was kept in a fixed deposit, along with accrued interest, against the outstanding loan of the accused company. The bank's claim was based on a prior court order from Aug 3, 2016, which allowed SBI to auction a mortgaged property of Peacock Media Ltd, but directed it to reserve Rs 3.5 crore from the sale proceeds.
This reservation was made 'subject to adjudication' under Section 7 of the MPID Act, which deals with claims over attached property. In an additional affidavit, the bank disclosed that the reserved amount, as of Aug 22, swelled to Rs 5.5 crore due to accrued interest. The SBI contended that the bank's mortgage on the property dated back to 2009, prior to the property's attachment by the state government in 2016. It was submitted that huge public money was involved and that the bank's total outstanding recovery from Peacock Media Ltd stood at over Rs 47.1 crore.
The EOW strongly opposed the application. The prosecution submitted that the original order was conditional and that the MPID Act, being a special law, has an overriding effect on general recovery laws like the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act), under which the bank was making its claim. The court was also informed that while the total amount defrauded from investors was Rs 4.1 crore, only Rs 1.7 crore was paid back, and the claims of 298 depositors were yet to be fully satisfied.
It was further submitted that allowing the bank's plea would leave no sufficient amount to repay the depositors. The judge noted that the reserved amount was intended to satisfy the claims of the depositors, which remained largely unpaid. Citing a Supreme Court ruling, the judge noted that the provisions of the MPID Act override those of the SARFAESI Act. In view of the ruling, I hold that the applicant bank is not entitled to the claim of Rs 3.5 crore reserved by order of this court dated August 3, 2016.
Frequently Asked Questions
What was the main issue in the court case?
The main issue was whether State Bank of India (SBI) could appropriate over Rs 5.5 crore from a reserve fund to recover a loan from a company accused of fraud, or if this amount should be used to satisfy the claims of duped investors.
How much money was involved in the investor fraud case?
The total fraud amount was Rs 4.1 crore, and only Rs 1.7 crore was paid back, leaving the claims of 298 depositors yet to be fully satisfied.
What did the court decide regarding the reserve fund?
The court decided that SBI was not entitled to the Rs 5.51 crore from the reserve fund and directed the bank to transfer the entire amount, including accrued interest, to the account opened by the Economic Offences Wing (EOW).
Why did the court reject SBI's plea?
The court rejected SBI's plea because it believed that the reserved amount should be used to satisfy the claims of the depositors, who were mostly senior citizens and had been cheated of their money.
What is the MPID Act and how does it affect this case?
The Maharashtra Protection of Interest of Depositors (MPID) Act is a special law that overrides general recovery laws like the SARFAESI Act. It prioritizes the claims of depositors over those of financial institutions in cases of fraud.
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