Bombay HC dismisses NSEL plea on invocation of MPID act

In a setback to promoters of the National Spot Exchange Ltd (NSEL), the Bombay high court has dismissed a petition filed by the exchange seeking quashing of invocation of provisions of Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act in the alleged Rs 5,600-crore scam case registered against it.

The division bench of Justice Ranjit More and Justice Anuja Prabhudessai dismissed the petition filed by the NSEL, observing that prima facie investigations by the city police’s Economic Offences Wing (EOW) reveal violation of the provisions of the MPID Act by the company.

NSEL’s counsel Aspi Chinoy had contended that the company’s Commodity Spot Exchange only provided an electronic/online trading for the purchase and sale of commodities. He argued that NSEL never received or accepted any deposit as defined in Section 2(c) of the MPID Act. He had also argued that the application of MPID Act against NSEL and its directors is “ex-facie illegal and without jurisdiction”.

The court, however, refused to accept this. The bench observed that the material collected by the EOW during the probe reveals that the petitioner did not carry out its operations as per the bye-laws and permission granted to it by the Government of India.

The bench also noted that a chargesheet has already been filed and further probe is also underway, and the petitioner has an alternate efficacious remedy to apply for discharge before the trial court.

The bench noted that from the statements recorded by the investigating agency, it would prima facie reveal that NSEL represented to its traders and suppliers of the goods that they would be provided a security-free loan. The bench observed, “The petitioner had assured its clients fixed returns at 14 to 16 per cent perannum.”