In a setback to 63 Moons Technologies, the Supreme Court on Friday upheld the Maharashtra government’s decision to attach the company’s properties in the National Spot Exchange (NSEL) scam, which had affected over 13,000 investors in 2013.
63 Moons Technologies was formerly known as Financial Technologies (India) (FTIL), the parent company of the now-defunct NSEL. FTIL was owned and founded by Jignesh Shah. The spot exchange suspended trading in July 2013 following a payments crisis estimated at Rs 5,600 crore.
The economics offences wing of the Mumbai Police, which had attached assets worth Rs 7,063 crore belonging to FTIL, in its chargesheet last year had alleged that Shah, his family members, confidantes and associates were involved in trying to induce brokers with promises of high returns.
In April 2018, the Maharashtra government issued notifications ordering attachment of assets of 63 Moons.
The SC set aside a Bombay High Court judgment, which had quashed the notifications issued by the state government to attach bank accounts and properties of 63 Moons under the Maharashtra Protection of Interest of Depositors (MPID) in Financial Establishments Act. A bench headed by Justice DY Chandrachud said the HC had taken an erroneous view while interpreting the provisions of the state depositors’ law.
“The HC has formed an erroneous opinion that firstly, only if the return includes interest, bonus or any other added benefit, it would be a deposit for the purpose of the MPID Act. However, Section 2(c) states that the return may be – with or without any benefit in the form of interest, bonus, profit or in any other form. The definition does not stipulate that there must be an added benefit, rather that the added benefit ‘is irrelevant for the purpose of the definition; secondly, that for the purpose of Section 2(c), the receipt of the commodity or money must be retained by itself’. The definition does not provide any such embargo. Rather, the definition is broadly worded to include even the possession of the commodities for a limited purpose. The HC has read the definition of deposit narrowly without any reference to the salutary purpose of the MPID Act,” the Bench ruled.
The apex court said the HC should not have made observations on the merits of the criminal proceedings in the NSEL scam, while hearing the issue of attachment of properties.
While quashing all the notifications issued by the state government in 2016 and 2018 attaching movable and immovable properties of 63 Moons, the HC had held that NSEL, which was a wholly owned subsidiary of 63 Moons, was not a financial establishment for the purposes of the Maharashtra law since it did not receive deposits. The HC had also said that NSEL was an electronic trading platform, which only facilitated transactions between buyers and sellers.
“NSEL only traded in agricultural commodities and steel. Agricultural commodities were not covered by the definition,” 63 Moons argued, adding that the traders who participated on NSEL’s platform were corporate traders and not investors.
The state government had argued that NSEL was a financial establishment under the Act since it had accepted deposits. Besides, NSEL had been trading in different types of commodities through farmer contracts, paired contracts, e-series contracts, among others and had guaranteed assured returns to investors. The provision of warehouse receipts along with the assurance of returns indicates that NSEL was accepting deposits, the Mahrashtra government argued.
