Pen Cooperative Urban Bank Fraud: ED Restitutes Properties Worth Rs289.54 Crore to MPID Authority
Moneylife Digital Team 20 January 2025
The Mumbai office of the directorate of enforcement (ED) has restituted immovable properties worth Rs289.54 crore to the competent authority appointed under the Maharashtra Protection of Interest of Depositors (MPID) Act by the Maharashtra government in the case of the Pen Cooperative Urban Bank Ltd fraud. 
 
The assets were provisionally attached by the ED under Section 5 of the Prevention of Money Laundering Act (PMLA) as the erstwhile office-bearers had cheated and siphoned off the Bank funds for private investments. The investigation was initiated based on a first information report (FIR) registered by the Pen police station from Raigad district in Maharashtra. 
 
In the charge-sheet, police alleged that office-bearers of Pen Cooperative Urban Bank entered into a criminal conspiracy with the then auditors of the bank willfully and intentionally manipulated the books of accounts and fraudulently reported profit and caused a loss of Rs651.35 crore to the lender.
 
ED investigations revealed that the proceeds generated from the crime of forgery and cheating were diverted and routed through the bogus cash credit accounts opened in the bank using the services of cheque discounters in the market. Part of such proceeds of crime (POC) was utilised to purchase immovable properties in the names of third parties (Benami properties) at different locations in the Raigad district of Maharashtra. These benami properties measuring 70.9 acres worth Rs25.20 crore were attached under Section 5 of PMLA on 26 May 2014 and 3 December 2014. Further, a prosecution complaint dated 20 June 2018 has been filed in the subject case before the Special Court, PMLA and the trial is underway.
 
Meanwhile, one depositor of Pen Urban Cooperative Bank filed a criminal writ petition before the Bombay High Court (HC) praying for the release of the properties attached by the ED under the PMLA.
 
On 7 October 2016, the HC directed the agency to hand over the properties to the competent authority under MPID. However, ED challenged the order before the Supreme Court which, on 3 November 2017, stayed the order passed by the Bombay HC.
 
On 1 February 2019, the MPID authorities filed an application under Section 8(8) of PMLA before the Special Court (PMLA) to confiscate the attached property to MPID for its restitution.
 
Pen Cooperative Urban Bank had 200,000 depositors and 42,000 shareholders who had lost their hard-earned money. In the larger interest of depositors and currently ongoing restitution efforts, the ED says it took a pragmatic view and decided to withdraw its special leave petition (SLP) filed before the apex court. Consequently, it filed an affidavit before the SC. The apex court on 13 December 2024 allowed the ED to withdraw the SLP in this matter.
 
The ED then filed an affidavit before the special court (PMLA) expressing its willingness to restitute the properties covered by the HC's 7 October 2016 order. 
 
Last week, the Special Court (PMLA) allowed the ED's application and ordered the restoration of 29 immovable properties, which are presently valued at Rs289.54 crore, to the competent authority appointed by the state government under the MPID Act.
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