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The State of Maharashtra vs 63 Moons Technologies Ltd.

Civil Appeal · 2022 INSC 465Decided 22 Apr 2022
Civil Appeal Nos. 2748-2749 of 2022

Background

National Spot Exchange Ltd. (NSEL), a subsidiary of 63 Moons Technologies Ltd. (then Financial Technologies India Ltd.), ran a commodity trading platform offering "paired" buy-sell contracts that effectively promised investors a fixed return. The scheme collapsed, leaving thousands of investors unable to recover their money: a scam running into thousands of crores of rupees. The Maharashtra government attached properties of 63 Moons under the MPID Act, treating NSEL as a "financial establishment" that had taken "deposits" from the public. The Bombay High Court quashed these attachment notifications, holding that NSEL was merely a trading intermediary and not a financial establishment taking deposits.

Decision Breakdown

The Supreme Court held that the MPID Act defines "deposit" very broadly. It need not involve an added benefit like interest, and the return need not be in the same form as what was received (money or commodity). Given NSEL's structure, where funds and commodities passed through it under an assured-return arrangement, its dealings fell squarely within this broad definition. The Court found the High Court had misread the statute narrowly and ignored the settled position (from earlier rulings) that the MPID Act is constitutionally valid. It restored the attachment notifications, allowing the state to proceed against 63 Moons' properties to help repay defrauded investors.

Lesson Learnt

Depositor-protection laws like the MPID Act are read broadly and purposively to protect ordinary investors from financial fraud, even when the fraudulent scheme is dressed up as commodity trading rather than a conventional deposit scheme; courts will look past corporate structuring to reach the entities and assets connected with the fraud.

Official source (sci.gov.in)View Judgment (PDF)

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