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The Bombay High Court on Tuesday reserved the order in the case filed by National Spot Exchange (NSEL) challenging applicability of the Maharashtra Protection of Interest of Depositors (MPID) Act in the Rs 5,600 crore payment crisis at the exchange.
An intervener counsel argued that then NSEL managing director Anjani Sinha and others were fully aware of defaults by some of NSEL members and continued to provide financial support.
Thus, the issue of default did not erupt in one month but happened over many years.
NSEL counsel Gopal Krishna Shenoy, however, countered by saying, “Accepting money on behalf of buyers and sellers does not amount to ‘deposits’. If it is not a deposit, the remedy should not be under the MPID Act. This should be a case of Indian Penal Code (IPC) for misrepresentation of facts, guaranteeing returns on behalf of traders through complete backing of goods in the warehouse. If goods were not there, the case should have been for cheating, forgery, false representation of facts, assurance of returns, which were not fulfilled, etc., but not under MPID.”
ALSO READ: Bombay HC allows collecting info on outstanding from NSEL investors
The MPID Act says the ‘deposit’ accepted by a financial establishment should be retained, processed and returned by it with or without interest on maturity. In this case, the money was accepted by NSEL, but not retained, processed and returned by it. The objective of the exchange is to attract participation, which it did after luring traders through various types of guarantee and assurance mentioned in NSEL bye-laws and brochures.
In fact, the Enforcement Directorate had observed that the money accepted by NSEL is not a ‘deposit’, he added.
Ketan Shah, an investor and frontrunner in NSEL complaints, told the court: “Immediately before the scam broke out, NSEL approached a non-banking finance company to borrow Rs 4,921 crore to settle traders’ dues. But, the attempt was failed. NSEL acted as a guarantor.”
An intervener counsel argued that then NSEL managing director Anjani Sinha and others were fully aware of defaults by some of NSEL members and continued to provide financial support.
Thus, the issue of default did not erupt in one month but happened over many years.
NSEL counsel Gopal Krishna Shenoy, however, countered by saying, “Accepting money on behalf of buyers and sellers does not amount to ‘deposits’. If it is not a deposit, the remedy should not be under the MPID Act. This should be a case of Indian Penal Code (IPC) for misrepresentation of facts, guaranteeing returns on behalf of traders through complete backing of goods in the warehouse. If goods were not there, the case should have been for cheating, forgery, false representation of facts, assurance of returns, which were not fulfilled, etc., but not under MPID.”
ALSO READ: Bombay HC allows collecting info on outstanding from NSEL investors
The MPID Act says the ‘deposit’ accepted by a financial establishment should be retained, processed and returned by it with or without interest on maturity. In this case, the money was accepted by NSEL, but not retained, processed and returned by it. The objective of the exchange is to attract participation, which it did after luring traders through various types of guarantee and assurance mentioned in NSEL bye-laws and brochures.
In fact, the Enforcement Directorate had observed that the money accepted by NSEL is not a ‘deposit’, he added.
Ketan Shah, an investor and frontrunner in NSEL complaints, told the court: “Immediately before the scam broke out, NSEL approached a non-banking finance company to borrow Rs 4,921 crore to settle traders’ dues. But, the attempt was failed. NSEL acted as a guarantor.”
