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SUPREME COURT OF INDIA
Dhananjaya Y. Chandrachud, Surya Kant, Bela M Trivedi, JJ.
The State of Maharashtra – Appellant
Versus
63 Moons Technologies Ltd. – Respondent
Civil Appeal Nos. 2748-49 of 2022 with Civil Appeal Nos. 2750-51 of 2022
Decided on : 22-04-2022
| Table of Content |
|---|
| 1. nsel's operations and legality (Para 1 , 2 , 3 , 5) |
| 2. events leading to the property attachment (Para 4 , 6 , 7 , 8 , 9 , 10 , 11) |
| 3. arguments from parties regarding nsel's classification (Para 12 , 13 , 14 , 15) |
| 4. analysis of mpid act's framework (Para 16 , 17 , 18 , 19) |
| 5. understanding the definitions and operations under nsel (Para 21 , 22 , 23 , 24 , 25) |
| 6. interpretation of deposits according to mpid act (Para 30 , 31 , 32 , 33 , 34) |
| 7. legal implications of evidence presented (Para 35 , 36 , 37) |
| 8. conclusion on the validity of attachment notifications (Para 66 , 67) |
JUDGMENT
Dr Dhananjaya Y Chandrachud, J.
| A. Facts |
| B. Submissions |
| C. Analysis |
| C. 1 Framework of the MPID Act |
| C. 2 Framework of NSE |
| C. 3 Definitions of 'Deposit' and 'Financial Establishment': Interpretation of Section 2 (c) and 2(d) of the MPID Act |
| C. 3.1 Settlement Guarantee Fund: Deposit under Section 2 (c) of the MPID Act |
| C. 3. 2 Receipt of commodities: Deposit under Section 2 (c) of the Act . |
| C.4 Uncovering the Conspiracy |
| C. 4.1 The Grant Thornton Report |
| C. 4. 2 63 Moons Judgment |
| C. 5 Constitutional Validity of the MPID Act |
| C. 6 The High Court's Judgment |
1. The appeal arises from a judgment dated 22 August 2019 of the Bombay High Court, by which certain notifications attaching the property of the respondent under Section 4 of the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act 1999 (MPID Act) have been quashed. The respondent holds 99.99% of the shareholding of National Spot Exchange Ltd (NSEL). At the core of the dispute is whether NSEL is a 'financial establishment' within the meaning of Section 2 (d) of the MPID Act.
A. Facts
2. NSEL is a company incorporated under the COMPANIES ACT 1956, and is a wholly owned subsidiary of Financial Technologies (India) Limited, which is now known as 63 Moons Technologies Limited (FCIL or 63 Moons). On 5 June 2007, the Union of India issued a notification under Section 2 7 of the Forward Contracts (Regulation) Act 1952 ( FCRA ) exempting forward contacts of one-day duration for sale and purchase of commodities traded on NSEL from the application of the provisions of the enactment. NSEL started operating as an exchange for spot trading in commodities. NSEL launched contracts for buying and selling of commodities on its trading platform with different settlement periods, ranging from T+0 to T+36 days. T indicates the trade date, that is the date on which the trade took place and +0 or +36, indicates the number of business days after the trading day when the delivery of the commodity and the payment of price is made.
3. NSEL offered 'paired' contracts. Such contracts enabled traders either by themselves or through their brokers, to simultaneously enter into paired contracts, such as of T+2 and T+25 duration. The seller through his broker puts the commodities on sale and the buyer through his broker looks to purchase commodities of specific requirements. NSEL then pairs the buyer and the seller if there is a match between the requirement of the buyer and the available commodities with the seller. The buyer and the seller simultaneously enter into T+2 and T+25 contracts. For example, if 'A' (the buyer) wants to buy one ton of basmati rice, he would trade on NSEL's platform through his broker. The platform would identify that 'B' (the seller) has an offer to sell the quantified commodity. NSEL would then match both the contracts. The date of matching of the contracts is termed as the trade date or T'. 'A' must then pay the price of the commodity to NSEL, which checks if 'B' has deposited the stock in a warehouse accredited to NSEL for delivery within two days. Once NSEL has confirmed that 'B' has deposited the stock in the warehouse, it transfers the money to 'B'. Simultaneously, the same parties enter into a T+25 contract by
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