Bombay HC Releases Chandigarh Property From MPID Attachment In Alleged NSEL Scam, Finds No Nexus With Investors' Funds

Mumbai, July 22: The Bombay High Court has ordered the release of a residential property in Chandigarh that had been attached under the Maharashtra Protection of Interest of Depositors (MPID) Act in connection with the National Spot Exchange Limited (NSEL) case, holding that there was no material to show a direct nexus between the property and investors' funds.

High Court Sets Aside Order

A bench of Justices Ajey Gadkari and Kamal Khata allowed an appeal filed by Seema Sharma and set aside a 2021 order of the Special MPID Court that had refused to release the property from attachment.

The house had been attached in 2014 on the allegation that it belonged to Lotus Refineries Pvt Ltd, an NSEL borrower company. Sharma argued that she was neither a director nor associated with the company's affairs and had purchased the property in her own name through a housing loan from Punjab National Bank.

The court noted that the property was “substantially purchased and constructed out of a loan advanced by a nationalised bank”, with the bank sanctioning Rs 3.63 crore for its purchase and construction. It also observed that the bank had already initiated recovery proceedings and obtained a recovery certificate for over Rs 2.53 crore.

No Nexus With Investors' Funds

While the forensic audit report showed that Sharma had received Rs 55 lakh from her husband, Arun Sharma, an accused in the NSEL case, the bench pointed out that Rs 68.80 lakh had already been recovered from her and deposited with the Economic Offences Wing.

“In absence of any material establishing a nexus between the subject property and the investor’s funds, the attachment of the entire property cannot be sustained,” the bench said.

Rejecting the argument that the attachment should continue because Sharma's husband was a co-borrower in the bank loan, the court said, “The mere inclusion of the Appellant's husband as a co-borrower would not alter the nature or character of the loan advanced by the Bank to the Appellant as the principal borrower.”

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Court Clarifies Findings

The bench also noted that the investigation and forensic audit report did not attribute any role to Sharma in the alleged offence or disclose any flow of funds from Lotus Refineries to her.

The High Court quashed the attachment notifications issued in 2014 and released the Chandigarh property from attachment under the MPID Act, while clarifying that the case was decided on its own peculiar facts.

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