THE STATE OF MAHARASHTRA versus 63 MOONS TECHNOLOGIES LTD.

Citation: [2022] 10 S.C.R. 465 · Decided: 22-04-2022 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 7 · see the full citation network in Lexace

Judgment (excerpt)

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   [2022] 10 S.C.R. 465
465
THE STATE OF MAHARASHTRA
v.
63 MOONS TECHNOLOGIES LTD.
(Civil Appeal Nos. 2748-49 of 2022)
APRIL 22, 2022
[DR. DHANANJAYA Y. CHANDRACHUD, SURYA KANT
AND BELA M. TRIVEDI, JJ.]
Maharashtra Protection of Interest of Depositors (in
Financial Establishments) Act, 1999: ss. 2(c), 2(d), 4 and 5 – NSEL,
Financial Establishment or not – Respondent holds 99.99% of the
shareholding of NSEL company - NSEL started operating as an
exchange for spot trading in commodities – It launched contracts
for buying and selling of commodities on its trading platform with
different settlement periods – Subsequently, there was a fraud
involving settlement crises of Rs 5500 crores owed to over 13,000
sellers/investors on the trading platform of NSEL – NSEL defaulted
in payment of the outstanding dues – Since it did not have sufficient
money or property for attachment u/s. 4, the State attached properties
of the respondent which owns 99.99% of the shareholding of NSEL
– Petition by the respondents challenging the invocation of MPID
Act on the ground that the exchange is not a ‘financial establishment’
u/s 2(c) – High Court quashed the Notification holding that the
NSEL only performed the role of a facilitator, in a manner similar to
the Bombay Stock Exchange; that NSEL did not receive money with
the obligation to return it on maturity; that the fact that VAT is
collected by the selling members from the buying members and TDS
is not deducted by NSEL indicates that NSEL is a mere pass-through
platform; that NSEL did not receive any deposits within the meaning
of s.2 (c) since NSEL did not receive the commodities or money to
be retained; that NSEL only received transaction and warehouse
charges which cannot be considered as a deposit, thus, the NSEL is
not a ‘financial establishment’ – On appeal, held: NSEL is a financial
establishment – Impugned notifications issued u/s. 4 of the MPID
Act attaching the properties of the respondent are valid – NSEL
receives ‘money’ in the form of Settlement Guarantee Fund that is
returned in money and service – SGF is not covered by the exceptions
of the s..2(c) thus, it would fall within the expression ‘deposit’ u/s
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SUPREME COURT REPORTS
[2022] 10 S.C.R.
2(c) – NSEL offers a multitude of  3services‘ in return for receiving
the commodity – Receipt of the commodities and holding the
commodities in the accredited warehouses is a ‘deposit’ u/s 2(c) –
Thus, the High Court erred in holding that only if the return includes
interest, bonus or any other added benefit, it would be a deposit for
the purpose of the MPID Act – High Court read the definition of
‘deposit’ narrowly without any reference to the salutary purpose of
the MPID Act – Thus, the order passed by the High Court is set
aside.
s. 2(c) and 2(d) – Definitions of Deposit and Financial
Establishment – Interpretation of.
s. 2(c) - Deposit under - Settlement Guarantee Fund –
Explained.
s. 2(c) - Deposit under - Receipt of commodities – Held: Receipt
of the commodities and holding the commodities (when the members
are put in constructive possession) in the accredited warehouses is
a ‘deposit’ u/s. 2(c) of the Act.
Allowing the appeals, the Court
HELD: 1.1 The notifications attaching the properties of the
respondent were issued under Section 4 of the Maharashtra
Protection of Interest of Depositors (in Financial Establishments)
Act, 1999. Section 4 covers only those situations where a financial
establishment is a defaulting entity. [Para 30][505-G]
1.2 Financial Establishment is defined as any person
accepting a deposit‘. The definition excludes from its purview
(a) a corporation or cooperative society controlled or owned either
by the State or the Central Government; and (b) a Banking
Company as defined under Section 5(c) of the Banking Regulation
Act 1949. Since NSEL does not fall within any of the exceptions,
it would be a ‘financial establishment’ for the purposes of the Act
if it is a person accepting deposit. Section 3(42) of the General
Clauses Act 1897 provides an inclusive definition of ‘person’ to
include both incorporated and unincorporated companies. The
expression deposit is defined in Section 2(c) of the MPID Act.
The statutory definition of the expression deposit comprises of
the following ingredients: (i) Any receipt of money or the
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acceptance of a valuable commodity by a financial establishment;
(ii) Such acceptance ought to be subject to the money or
commodity b

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