Mumbai: The Bombay High Court has observed that the intention of the legislature was to “protect the interest of depositors from public, mostly middle-class and poor economic strata of the society, and not corporate entities” when it enacted the Maharashtra Protection of Interest of Depositors (in Financial Establishment) Act, 1999 (MPID Act), while refusing to interfere with a lower court order related to the 2013 National Spot Exchange Limited (NSEL) scam.
A division bench of Justices Ajey Gadkari and PD Naik dismissed two separate appeals filed by the NSEL challenging the order of special judge (MPID), observing: “In fact, it is in view of the intention of the legislature to protect the interest of depositors from public, mostly middle-class and poor economic strata of the society (through MPID Act), and not the corporate entities”.
2013 special court order
On October 13, 2022, the special court had directed the competent authority to make graded distribution to only individual investors/depositors who had outstanding amount between Rs10 lakh and 20lakh from the available amount with it, after due verification. The court passed the order while hearing pleas of two women, aged 91 years and 53 years, respectively, who had outstanding dues from NSEL of little over Rs10 lakh each.
The court allowed the same, which was challenged by NSEL before the HC contending that there was no separate classification available under the law for distribution to individual depositors having amounts outstanding between Rs10 lakh and Rs20 lakh. Also, there cannot be further classification at the request of two depositors.
However, the judges disagreed with the arguments and said: “According to this court, such graded distribution of money to the individual investors in the range of Rs10 lakh and Rs20 lakh is certainly as per the principle of equity, in conformity with the intention of legislature and the statement and object behind enacting the MPID Act.”
Also, the court noted that the class of individual investors/depositors to whom outstanding amount between Rs10 lakh and Rs20 lakh from the available amount with the Competent Authority as directed to be paid by the trial court, does not create further/separate classification of investors/depositors.
The HC added that according to the trial court, 2,040 individuals have outstanding amount between Rs10 lakh and Rs20 lakh. That, if the payment between Rs10 and 20 lakh is effected to the said individual investors, it would satisfy approximately 30% of their balance outstanding.
The NSEL case pertains to alleged financial embezzlement by the Multi-Commodity Exchange (MCX) and Financial Technologies India Ltd – both promoted by Jignesh Shah. The Mumbai Police had registered a case against the NSELunder the MPID Act on behalf of 11,000 investors to recover Rs5,600 crore allegedly lost in the scam. Last December, the EOW filed an 11th and last charge sheet in the case.
(To receive our E-paper on WhatsApp daily, please click here. To receive it on Telegram, please click here. We permit sharing of the paper's PDF on WhatsApp and other social media platforms.)