What MPID act is used in Maharashtra's probe into the Torres scam?

Investors cheated in Torres Ponzi may get back Rs 40 crore in next six months Under MPID Act, Mumbai Police’s Economic Offences Wing (EOW) has started auctioning the seized properties of the defendants.

Several thousand investors had protested outside several Torres stores in Mumbai in January 2025 after they stopped getting the interest payments they were promised in a number of investment schemes in late December 2024. According to the EOW investigation, the business had allegedly come up with several schemes that lured customers into buying jewellery at astronomical weekly interest rates. Some of these schemes even promised an annual return of up to 500 percent. The business is said to have lured them with gifts such as jewelry, iPhones and other expensive gifts and suddenly stopped paying in December 2024, sending panic amongst those who had invested with Torres.

As it pertains to the attachment, sale and distribution of seized assets of fraudulent businesses, this is the most recent case filed under the MPID Act. Other states have enacted similar legislation. Here are some facts about the act.

On 21 January 2000, the President signed into law the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999, passed by the state legislature. When it was introduced, the bill said that the number of financial institutions in the state was increasing and some of them had plans to steal the money that people had deposited. They tempted the investors by promising historically high interest rates or returns. Most of them were from middle-class and low-income backgrounds.

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Which provisions of the Act are the most important?

Under the Act, if a financial institution fraudulently fails to pay back a deposit at maturity along with the interest, bonus or profits promised, all the staff—promoter, partner, director, manager and staff who are in charge of running the business—may be held liable. If convicted, they could be liable to a maximum of six years jail and a fine of up to Rs 1 lakh.

It also allows the government to attach funds or other assets that are alleged to have been obtained by the financial institution, sets out the procedure to be followed, and gives courts the power to make the attachment order final.

Supreme Court observations on its constitutionality

The Supreme Court in 2011 heard an appeal against the above high court order and also an order on a similar act in Tamil Nadu and held that the Tamil Nadu Act and the MPID Act were constitutional.

The order said the financial institutions mentioned in the State laws did not hold any licenses from the RBI.

SC says that the state laws were intended to allow the sequestration and liquidation of defrauded financial institutions so that resentful depositors could be given a speedy and effective remedy.

“The depositors would not have been able to recover their money, let alone the interest thereon, because of the huge expenditure involved in the way of court fees and advocates’ fees, in addition to other inconveniences involved and the long delay in disposing off the cases due to docket explosion in courts,” the apex court said. The apex court upheld the validity of the act in 2022 too.