Source: Indian Express 

Introduction 

The Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (MPID Act) was enacted by the Maharashtra state legislature and received Presidential assent on 21st January 2000. The legislation was introduced to address the growing concern of financial establishments defrauding public depositors, particularly those from middle-class and economically disadvantaged backgrounds, who were enticed by promises of exceptionally high returns on investments. 

How did Torres Jewellers defraud 125,000 investors in the Torres Ponzi scam? 

• The case involves Torres Jewellers, a jewelry chain accused of defrauding approximately 125,000 investors through a fraudulent investment scheme. 
• The scam came to light in January 2025 when thousands of investors protested outside multiple Torres outlets in Mumbai. 
• The company had abruptly stopped paying promised interest payments to investors in late December 2024. 
• According to the Economic Offences Wing (EOW) investigation, Torres offered schemes with extraordinarily high returns, including some with annual returns up to 500%. 
• The company allegedly enticed investors with expensive incentives including iPhones, jewelry, branded bags, cars, and apartments. 
• The case has been registered under the Maharashtra Protection of Interest of Depositors (MPID) Act. 
• The Mumbai Police's EOW has initiated procedures to auction seized properties of the accused under the MPID Act. 
• Investors are expected to receive approximately Rs 40 crore over the next six months from these proceedings. 
• The scam particularly impacted middle-class investors who were attracted by the promise of high returns. 

How will Asset Auctions Under the MPID Act Benefit Investors in the Torres Ponzi Scam? 

• The Mumbai Police's Economic Offences Wing (EOW) has begun procedures to auction the seized properties of the accused parties under the MPID Act. 
• Affected investors are expected to receive approximately Rs 40 crore over the next six months through this process. 
• The development comes after thousands of investors staged protests in January outside multiple Torres outlets in Mumbai. 
• The protests were triggered when Torres suddenly stopped paying promised interest payments in late December 2024. 
• The EOW investigation revealed the company had allegedly operated schemes offering exorbitant weekly interest rates, with some promising annual returns of up to 500%. 

What Led to The Enactment of the Maharashtra Protection of Interest of Depositors Act? 

• The full name is the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999. 
• The Act was passed by the Maharashtra state legislature and received Presidential assent on January 21, 2000. 
• It was enacted in response to the growth of financial establishments in Maharashtra that were defrauding the public by misappropriating deposited money. 
• The Act specifically aimed to protect middle-class and economically disadvantaged investors who were being lured by promises of unprecedented interest rates or returns. 
• The legislation was deemed necessary due to the scale of fraud, with deposits running into crores of rupees, which had created significant public unrest and law and order problems. 
• The Act was particularly important for Mumbai, given its status as India's financial capital. 
• Under the Act, fraudulent establishments' properties can be attached, sold, and distributed to affected depositors through a streamlined process. 
• The law imposes penalties including imprisonment up to six years and fines up to Rs 1 lakh for those found guilty of financial fraud. 
• The Supreme Court has upheld the Act's constitutional validity, notably through judgments in 2011 and 2022, confirming it doesn't conflict with central legislation. 

How do the MPID Act Provisions Enforce Accountability and Protect Depositors? 

• Section 3: "Fraudulent default by Financial Establishment" 
  • Provides punishment up to six years imprisonment and fine up to one lakh rupees for defaulting on deposit repayment. 
  • Applies to promoters, partners, directors, managers, and employees responsible for management. 
• Section 4: "Attachment of properties on default of return of deposits" 
  • Allows government to attach money or property acquired from deposits. 
  • Applies when establishments fail to return deposits, pay interest, or provide promised services. 
  • Properties vest in Competent Authority once attachment order is published. 
• Section 5: "Appointment of Competent Authority" 
  • Officer not below Deputy Collector rank can be appointed. 
  • Must apply to Designated Court within 30 days of attachment order. 
  • Has control over attached monies and properties. 
• Section 6: "Designated Court" 
  • Constitution requires High Court Chief Justice's concurrence. 
  • Has exclusive jurisdiction over MPID Act cases 
  • Existing cases transfer to Designated Court 
• Section 7: "Powers of Designated Court regarding attachment" 
  • Can make attachment orders absolute. 
  • Investigates objections to attachment. 
  • Directs realization and distribution of assets among depositors. 
• Section 8: "Attachment of property of malafide transferees" 
  • Allows attachment of property transferred without good faith. 
  • Court can attach equivalent value from transferee's property. 
• Section 9: "Security in lieu of attachment" 
  • Establishments can offer security instead of facing attachment. 
  • Court must find security satisfactory and sufficient. 
• Section 11: "Appeal" 
  • 60-day window to appeal to High Court. 
  • Available to any aggrieved person including Competent Authority. 
• Section 14: "Act to override other laws" 
  • MPID Act provisions prevail over inconsistent laws. 
• Section 15: "Protection of action taken in good faith" 
  • Protects government officials from legal proceedings for actions under the Act 

Conclusion 

The Supreme Court has consistently upheld the constitutional validity of the MPID Act, notably in its 2011 and 2022 rulings, affirming that state laws do not conflict with central legislation. The Act serves as a vital legal mechanism for expeditious attachment and sale of fraudulent establishments' properties, providing an efficient remedy for aggrieved depositors that circumvents the delays and expenses associated with conventional legal proceedings.