Only Govt Can Issue Order To Attach Assets: Bombay HC

Mumbai: The Bombay High Court has held that a special court trying cases under the MPID Act does not have the authority to attach properties based on applications filed by aggrieved parties. The court emphasised that only the state government has the power to attach properties under the Maharashtra Protection of Interest of Depositors (MPID) Act, which requires the issuance of a notification.

About The Hearing

The court was hearing an appeal by IIFL Commodities Ltd (formerly India Infoline Commodities Limited), challenging a special court’s May 6, 2023, order directing authorities to attach its properties to the extent of funds it received from investors or depositors. IIFL, a brokerage firm, invested around Rs 326 crore on behalf of investors / depositors with the NSEL. It received around Rs 31 lakh as brokerage. After due process of law, the Economic Offence Wing (EOW) had initially attached Rs31 lakh received by IIFL, but an aggrieved investor approached the special court requesting the attachment of the entire investment amount.

The special court accepted this request, leading to IIFL’s challenge in the HC contending that only the government has the power to issue attachment notifications. IIFL’s counsel, Amit Desai and Chirag Shah, submitted that the government has to arrive at a satisfaction under Section 4 of the MPID Act to attach properties, and the courts cannot substitute its discretion, which is statutorily vested in the investigating agency. Desai added that in IIFL’s case, the special court issued a direction to the respondents and the competent authority to take appropriate steps in attaching its properties, which is not permissible under the scheme of the MPID Act.

Advocate Arvind Lakhawat, appearing for respondents investors, argued that the special court’s order was not fully complied with, as the April notification did not address attaching properties equivalent to the alleged deposit amounts received by the accused, which is Rs 326 crore. The HC said that since the power to issue a notification rests solely with the state, the special court’s order needed to be set aside. The case stems from the larger NSEL (National Spot Exchange Ltd) scam, in which over Rs 5,600 crore was allegedly siphoned from 13,000 investors. The NSEL scam, uncovered in 2013, allegedly involved defrauding investors through fraudulent trades, falsified documents, and forged accounts.