Trapped in a Deposit or Real-Estate Scheme Fraud? An Investor’s Rights and Remedies in India

The cheque bounced, the office has shut, the phone goes unanswered, and the man who promised you twenty-four per cent has stopped replying. What now? India gives an investor in this position not one remedy but six, in six different forums, and the useful question is not “can I sue” but which door to knock on first. This guide sets out the practical deposit scheme fraud victim remedies in India — what each route delivers, what it costs in time, and the deadlines that quietly destroy good claims.

Route 1 — The Criminal Complaint

Where money was taken on a promise the promoter never intended to keep, the offence is cheating under Section 318 of the Bharatiya Nyaya Sanhita, 2023 (BNS). Where the money was lawfully received and then misappropriated — collected for one project and spent on another — the offence is criminal breach of trust under Section 316 BNS. The distinction turns on when the dishonest intention arose, and it matters because the two offences require different proof. For victims exploring deposit scheme fraud remedies in India, identifying the correct offence is the first step towards criminal action.

You give information about a cognizable offence to the police under s.173 of the Bharatiya Nagarik Suraksha Sanhita, 2023, which replaced s.154 of the old Code. Information may be given orally or electronically and, importantly, “irrespective of the area where the offence is committed” — the Zero FIR is now statutory, so a police station cannot turn you away for want of territorial jurisdiction. You are entitled to a free copy of what is recorded.

If the police refuse, s.173(4) allows you to send the substance in writing by post to the Superintendent of Police, “failing which such aggrieved person may make an application to the Magistrate”, who may order investigation under s.175(3). Note the change: under the old Code you could go straight to the Magistrate under s.156(3); now the representation to the Superintendent is a statutory precondition. A complaint to the Magistrate under s.223 is a separate route, but a new proviso requires the proposed accused to be heard before cognizance is taken.

The mandate in Lalita Kumari v. Government of Uttar Pradesh, (2014) 2 SCC 1 — registration is compulsory where the information discloses a cognizable offence, with no preliminary inquiry into credibility — remains the governing principle, but it was decided under the old s.154 and is now qualified: s.173(3) permits an enquiry of up to fourteen days, with the permission of an officer not below Deputy Superintendent, for offences punishable with three years or more but less than seven. That band captures much of this territory, so some delay is now lawful.

Route 2 — The State Depositor-Protection Act (this is the one that recovers money)

This is the route most investors do not know about, and it is usually the one that produces a recovery. Under the Gujarat Protection of Interest of Depositors (in Financial Establishments) Act, 2003, on a depositor’s complaint the State Government may attach the establishment’s money, property and assets by an order in the Official Gazette, extending where necessary to the property of promoters, directors and partners (s.4(1)). The Collector of the district is competent to receive your complaint, must forward it with a report to the State Government, and must send a copy to the police for investigation (s.4(3)). On publication the property vests in a Competent Authority (s.4(2)), who assesses assets and liabilities and invites claims with proof (s.7). Under the central Banning of Unregulated Deposit Schemes Act, 2019 there is a parallel trigger: s.29 requires a police officer, on recording information about an offence under that Act, to inform the Competent Authority.

Route 3 — RERA, if it was a Property Scheme

If the money went into a flat, a plot or a unit in a registered real-estate project, the Real Estate (Regulation and Development) Act, 2016 is often the fastest route to a refund. Section 18 provides that where a promoter fails to complete or give possession as agreed, or discontinues business, he is liable on demand — if the allottee wishes to withdraw, and “without prejudice to any other remedy available” — to return the amount with prescribed interest.

Section 12 is the under-used provision for a mis-sold scheme: where a person makes an advance on the basis of a notice, advertisement, prospectus or model apartment and suffers loss from an incorrect or false statement, he is to be compensated, and the proviso gives a right to withdraw and be returned the entire investment with interest and compensation. If you were sold on a brochure promising assured returns, that is the section to read.

Complaints go to the Authority or to an adjudicating officer, a serving or former District Judge, and “person” expressly includes an association of allottees, so a group can act as one (ss.31, 71). Appeal lies to the State Real Estate Appellate Tribunal within sixty days (ss.43, 44). In M/s Newtech Promoters and Developers Pvt. Ltd. v. State of Uttar Pradesh, 2021 SCC OnLine SC 1044, the Supreme Court described the allottee’s right to a refund with interest as “an unconditional absolute right”, “not dependent on any contingencies or stipulations”; and in M/s Imperia Structures Ltd. v. Anil Patni, (2020) 10 SCC 783, it held the s.18 remedy is without prejudice to others and that RERA does not bar a consumer complaint.

Route 4 — The Consumer Commission

Under the Consumer Protection Act, 2019, “service” expressly includes facilities in connection with banking, financing, insurance and housing construction (s.2(42)). Pecuniary jurisdiction is set by the 2021 Rules, in force from 30 December 2021: the District Commission up to ₹50 lakh, the State Commission above that up to ₹2 crore, and the National Commission above ₹2 crore — measured by the consideration paid, not the amount claimed. Do not rely on the figures printed in the Act; they were superseded. The obstacle is s.2(7), which excludes a person who avails a service “for any commercial purpose”, with a carve-back for use exclusively to earn a livelihood by self-employment. In Shrikant G. Mantri v. Punjab National Bank, (2022) 5 SCC 42, the Supreme Court held that a service availed for a profit-making purpose takes the person outside “consumer”. A homebuyer is on strong ground; someone who invested purely to earn twenty-four per cent should expect this defence.

Route 5 — Insolvency, and why it Just got Harder

An allottee in a real-estate project is a financial creditor: the Explanation to s.5(8)(f) of the Insolvency and Bankruptcy Code, 2016 deems amounts raised from an allottee to have the commercial effect of a borrowing, upheld in Pioneer Urban Land and Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416. But an application must be brought jointly by not less than 100 allottees of the same project or 10 per cent of the total, whichever is less — a threshold upheld in Manish Kumar v. Union of India, (2021) 5 SCC 1.

The important recent development cuts against precisely the investor this article is written for. In Mansi Brar Fernandes v. Shubha Sharma, 2025 INSC 1110, the Supreme Court held that investors under assured-return or buy-back arrangements are speculative investors rather than homebuyers, cannot trigger the insolvency process, and should look to RERA; possession of a dwelling unit is the touchstone. Anyone advising a buy-back investor to assemble a hundred allottees and file at the NCLT should read that decision first.

Route 6 — The Securities Regulator

If the arrangement pooled contributions from many people, was managed on their behalf, and left them with no day-to-day control, it may be a collective investment scheme under s.11AA of the SEBI Act, 1992 — a category that has caught land-sale and plantation schemes, not merely conventional securities. SEBI may direct refunds under s.11B and order disgorgement of wrongful gains. In P.G.F. Ltd. v. Union of India (Supreme Court, 12 March 2013) s.11AA was upheld and a land-sale scheme was held to be a collective investment scheme, SEBI being empowered to order winding up and repayment; in Sahara India Real Estate Corporation Ltd. v. SEBI, (2013) 1 SCC 1, refund was ordered with interest.

Which Door First?

The right remedy depends on how the money was collected, the nature of the scheme and the relief you seek. The following comparison summarises the six legal routes available to deposit scheme fraud victims in India, when each applies and what it can achieve.

Civil or Criminal? Both, Carefully

Promoters invariably argue that this is “purely a civil dispute”, and sometimes they are right. In Paramjeet Batra v. State of Uttarakhand, (2013) 11 SCC 673, the Supreme Court held that where a dispute essentially civil in nature is given the cloak of a criminal offence, the High Court should quash the proceedings; in Indian Oil Corporation v. NEPC India Ltd., (2006) 6 SCC 736, it noted the growing tendency in business circles to convert civil disputes into criminal cases.

But the traffic runs both ways. In Trisuns Chemical Industry v. Rajesh Agarwal, (1999) 8 SCC 686, the Court held that “merely because an act has a civil profile is not sufficient to denude it of its criminal outfit”, and that an arbitration clause is no substitute for prosecution. The honest test is whether the ingredients of the offence are made out — above all, whether the intention to deceive existed when the money was taken. A scheme whose promised returns were arithmetically impossible from the start is a very different case from a business that failed.

Frequently asked questions

The police will not register my FIR. What now?

Send the substance in writing by post to the Superintendent of Police under s.173(4) BNSS. Only if that fails may you apply to the Magistrate, who can order an investigation under s.175(3). Under the new Code the representation to the Superintendent is a precondition, so keep proof of posting.

Civil suit or criminal complaint?

Both can be available on the same facts. Courts will quash a purely civil dispute dressed as a crime, but equally hold that a civil profile does not remove a criminal character. The question is whether dishonest intention existed at the outset.

Am I a “consumer” if I invested for returns?

Contested. Banking, financing and housing construction are within “service”, but a service availed for a commercial or profit-making purpose falls outside “consumer”. Homebuyers are on much safer ground than pure-return investors.

Can we take the developer to the NCLT?

Only jointly, with 100 allottees of the project or 10 per cent, whichever is less — and after the 2025 decision on speculative investors, assured-return and buy-back investors are outside this route.

What is the one deadline I must not miss?

The Competent Authority’s claim notice under the State depositor Act — one month under the Gujarat Act, after which the claim is not entitled to be paid.

Glossary

• Zero FIR — information about a cognizable offence recorded by any police station regardless of where the offence occurred, then transferred to the station with jurisdiction.
• Competent Authority — the officer who takes charge of attached property and invites, values and reports depositors’ claims.
• Allottee — under RERA, the person to whom a plot, apartment or building is allotted or sold.
• Financial creditor — under the insolvency code, a person to whom a financial debt is owed; allottees in a real-estate project are deemed to be within this class.
• Collective investment scheme — a pooled, professionally managed arrangement in which contributors have no day-to-day control, regulated by SEBI.

Related Reading

• The GPID Act explained: a complete guide to depositor-protection law
• GPID attachment and depositor restitution: how the Designated Court recovers money
• Assured-return and buy-back property MOUs: civil breach, RERA violation or deposit fraud?
• Criminal breach of trust vs cheating under the BNS

Sources

1. Bharatiya Nyaya Sanhita, 2023, ss.316 and 318 — bare text, India Code.
2. Bharatiya Nagarik Suraksha Sanhita, 2023, ss.173, 175 and 223 — bare text, India Code.
3. Lalita Kumari v. Government of Uttar Pradesh, (2014) 2 SCC 1 (Constitution Bench, 12 November 2013).
4. The Gujarat Protection of Interest of Depositors (in Financial Establishments) Act, 2003, ss.4 and 7 — bare text, India Code.
5. The Banning of Unregulated Deposit Schemes Act, 2019, ss.29 and 30 — bare text, India Code.
6. Real Estate (Regulation and Development) Act, 2016, ss.12, 18, 31, 43, 44 and 71 — bare text, India Code.
7. M/s Newtech Promoters and Developers Pvt. Ltd. v. State of Uttar Pradesh, 2021 SCC OnLine SC 1044 (11 November 2021).
8. M/s Imperia Structures Ltd. v. Anil Patni, (2020) 10 SCC 783.
9. Consumer Protection Act, 2019, ss.2(7) and 2(42); Consumer Protection (Jurisdiction of the District Commission, the State Commission and the National Commission) Rules, 2021, notified 30 December 2021.
10. Shrikant G. Mantri v. Punjab National Bank, (2022) 5 SCC 42.
11. Pioneer Urban Land and Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416; Manish Kumar v. Union of India, (2021) 5 SCC 1; Mansi Brar Fernandes v. Shubha Sharma, 2025 INSC 1110.
12. SEBI Act, 1992, ss.11AA and 11B; P.G.F. Ltd. v. Union of India (Supreme Court, 12 March 2013); Sahara India Real Estate Corporation Ltd. v. SEBI, (2013) 1 SCC 1.
13. Paramjeet Batra v. State of Uttarakhand, (2013) 11 SCC 673; Indian Oil Corporation v. NEPC India Ltd., (2006) 6 SCC 736; Trisuns Chemical Industry v. Rajesh Agarwal, (1999) 8 SCC 686.