The Bombay High Court ruled on August 22 that the National Spot Exchange Limited (NSEL) was not a financial establishment and hence, the attachment of assets of its promoter, 63 Moons Technologies, under the Maharashtra Protection of Interests of Depositors in Financial Establishments Act (MPID) Act was not valid. A division bench of justices Ranjit More and Bharati Dangre set aside seven notifications issued by the Maharashtra government last year for attachment of assets of 63 moons technologies.
The attachment was made as part of the Mumbai police's probe into the alleged Rs 5,600-crore NSEL scam.
The court was hearing a petition filed by 63 moons technologies, formerly known as Financial Technologies (India) Ltd, floated by Jignesh Shah, challenging the notifications.
"We have no hesitation in concluding that the NSEL is not a financial establishment and resultantly, the petitioner, who is a promoter of the said establishment, cannot be proceeded against under the provisions of the MPID Act.
"We are constrained to quash and set aside the action to which the petitioner is subjected to by taking recourse to the provisions of the MPID Act," the court said.
The bench noted that those trading on the NSEL platform did not invest with the NSEL in the form of its fixed deposits, equity or debentures, but traded commodities.
"The NSEL has always voiced its stand by stating that it is not a financial establishment and in response to the notices issued to it, the NSEL pointed towards defaulters who were responsible for the loss to the investors and the said contention of the NSEL was found to be substantiated by audit reports," the order said.
After the verdict was pronounced, senior counsel Rafiq Dada, appearing for the state government, sought a stay on the ruling. The bench, however, declined.
The counsels of 63 moons technologies -- Mukul Rohatgi and Vikram Nankani -- had argued that the NSEL was not a financial establishment but an electronic platform for commodity trade.
The company did not receive any part of the Rs 5,600 crore that were allegedly embezzled, they added.
Rafiq Dada argued that the attachment of assets of 63 moons technologies was justified as the NSEL itself did not own any property.
According to the Maharashtra government, 13,000 investors of the NSEL were duped to the tune of Rs 5,600 crore.
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