MUMBAI, March 30 -- A court under the Maharashtra Protection of Interest of Depositors (MPID) Act has ruled that money from the Rs.5,600-crore National Spot Exchange Ltd. (NSEL) scam was used to repay bank loans and may have to be returned to investors. The court rejected the banks' argument that these repayments were made in the "ordinary course of business." The case stems from the 2013 NSEL fraud, where several trading firms, including PD Agroprocessors, raised money through deals that promised fixed returns. These trades were later found to be unsupported by actual stock, leading to defaults and losses of Rs.5,600 crore for more than 13,000 investors. If the money recovered from PD Agroprocessors and its directors, who together owe about Rs.680 crore to the duped investors, is not enough, the court has directed the HDFC bank, ICICI bank, IndusInd bank and Kotak Mahindra bank to file undertakings, legally binding promises, that the banks will cover the shortfall. A key issue in the case was tracking the money trail. The court found that over Rs.30 crore in loan repayments to the four banks was made after PD Agro joined NSEL and began using accounts through which investor funds flowed. The court noted missing records such as stock registers and delivery documents, calling the transactions a "farce" from the beginning. The prosecution argued that repayments to banks were "malafide" transfers under the MPID Act because they were made using investor funds raised through fraudulent trades. However, the banks defended themselves by saying they are not 'financial establishments' under the MPID Act and had simply received repayments of legitimate loans "in the usual course of business". The court rejected this defence, saying under the provisions of the MPID Act, the key question is not whether the recipient knew the money was tainted, but whether the accused company had transferred it in good faith. The court said that even an unaware recipient cannot keep money if it came from fraud....