State of Maharashtra Vs 63 Moons Technologies Ltd. (Supreme Court of India)
Summary: The Supreme Court considered whether National Spot Exchange Limited (NSEL), a wholly owned subsidiary of Financial Technologies (India) Limited, now known as 63 Moons Technologies Limited, was a “financial establishment” within Section 2(d) of the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (MPID Act). The controversy arose after the Bombay High Court, by its judgment dated 22 August 2019, quashed notifications issued by the State of Maharashtra under Section 4 of the MPID Act attaching properties of 63 Moons. At the centre of the dispute was whether the money and commodities received through NSEL’s trading and settlement mechanism constituted “deposits” within Section 2(c), thereby bringing NSEL within the statutory definition of a financial establishment.
NSEL operated a spot commodity exchange and offered paired contracts with different settlement periods, including T+2 and T+25 contracts. Under the mechanism, a buyer and seller could simultaneously enter into two linked transactions, with the difference between the purchase and sale prices representing the trading member’s return. NSEL’s bye-laws prescribed the receipt and maintenance of margin payments, certified warehouse receipts, clearing and settlement obligations and a Settlement Guarantee Fund. Following defaults of approximately Rs. 5,600 crore and suspension of NSEL’s exchange operations in July 2013, criminal proceedings were initiated and the MPID Act was invoked. Maharashtra subsequently issued notifications attaching properties of 63 Moons.
