High Court junks NSEL's plea challenging MPID Act

The Bombay High Court today dismissed a petition filed by National Spot Exchange Ltd (NSEL) challenging the applicability of a tough law that protects depositors in the multi-crore rupee scam in which the bourse has been allegedly embroiled.
A bench, headed by Justices Ranjit More and Anuja Prabhudessai, said it was of the view that Maharashtra Protection of Interest of Depositors (MPID) Act would be applicable in this case and accordingly dismissed the plea.
Mumbai Police have registered a case against the now- crippled spot commodity exchange under MPID Act on behalf of 11,000 investors to recover Rs 5,600 crore allegedly lost in the scam which came to light in July 2013.

"In the present case, the provisions of MPID Act are invoked as the petitioner had assured its clients that if they invest in T+2 and T+25 schemes they would get assured returns of 14 to 16 per cent per annum. Hence, the said receipt of money, in our prima facie view, falls within the definition of "deposit", said the Judges.
"In that view of the matter, coupled with the fact that charge sheet and supplementary charge sheets have already been filed and further investigation is underway, we are not inclined to grant relief as sought in the petition at this stage as the petitioner has an alternative efficacious remedy to apply for discharge before the trial court. In the result, the petition is dismissed."

However, the Judges said their observations in the order were prima facie made for the limited purpose of considering the relief sought by the petitioner for quashing MPID Act. "If the petitioner (NSEL) applies for discharge in the trial court, it should be decided independently without being influenced by our observations," they said.

NSEL contended that it only provided online trading platform for purchase and sale of commodities by registered members and also provided the settlement of contracts by payments by the buyer to seller through the exchange and sale delivery of the commodity by the seller to the buyer.

The bourse never received or accepted any deposit as defined in Section 2(c) of MPID Act, NSEL counsel Aspi Chinoy, V A Thorat and Mahesh Jethmalani argued.
Advocate General Anil Singh argued the Act in this case was rightly invoked as the petitioner (NSEL) had assured its clients, who traded on its platform, returns at 14 to 16 per cent per annum.
The Act, among other things, allows investigators to attach immovable assets of accused in a scam to recover money lost by depositors.