Bombay High Court orders payout to small claimants in NSEL case

Bombay High Court orders payout to small claimants in NSEL Case

Exchange bye-laws permit such mutual distribution from the clearinghouse to small traders. Some 6445 small claimants will get their dues varying between Rs 2 lakh to Rs 10 lakh

The Bombay High Court (HC) has ruled that the competent authority (CA) in the National Spot Exchange Limited (NSEL) case must distribute on a priority basis the amount lying in its escrow account to genuine claimants whose outstanding is in between Rs 2 lakh to Rs 10 lakh.

A two-member bench of the HC comprising Justices SS Shinde and Manish Pitale passed the order on 8 March 2021, which will give a major relief to some 6445 small claimants.

The Pune-based NSEL has been in support of this distribution to small claimants from the beginning. Accordingly, NSEL also paid Rs 180 crore, taking a loan from 63 moons, to small claimants which included 100 per cent payment to claimants up to Rs 2 lakh and 50 per cent to claimants up to Rs 10 lakh.

However, some trader forums like NIAG, NAARA, NIF opposed the disbursement of the outstanding amount and tried their best to get the petition derailed. The CA, under the influence of Ketan Shah and other investor protection forums, suppressed the government communication favoring payment to small traders and got it distributed to all, including HNI claimants instead of seeking clarification from the HC.

NSEL requested the CA to follow the due process of law and distribute the payout through High Court Committee (HCC) after verifying the genuineness and authenticity as per bye-laws of exchange, which is the only rightful process for distribution.

Exchange bye-laws permit such mutual distribution from the clearinghouse to small traders. While NIAG along with other investor forums did not file cases, efforts of NSEL and 63 moons resulted in the recovery. As per the information available on social media, the personal income of Ketan Shah has witnessed a huge surge after he started representing investors association.

The GC bench, while hearing the appeal of NSEL claimant Rabibai Mohamad Ismail ordered that the amount lying in CA's escrow be distributed among NSEL claimants with outstanding between Rs 2 lakh and Rs 10 lakh so that all pending dues of small claimants are cleared.

However, Ketan Shah who heads NSEL Investors Action Group (NIAG), opposed this order favoring small claimants and has sought to challenge the same in the Apex Court. HC has kept the order in abeyance for two weeks, with no further extensions.

"By challenging the HC order favoring 6445 small claimants, out of the 13,000 so-called claimants, whose interest is Ketan Shah protecting?" questioned an NSEL spokesperson.

He said, "Over Rs 250 crore is lying in the escrow account which, if distributed amongst the small claimants, would clear the outstanding of around 6445 claimants. Under the guise of helping small and suffering claimants, Ketan Shah and NIAG misguided the government and investigating agencies by trading their tears. Now Ketan Shah is taking an opposite stand and betraying them by opposing the HC order," the spokesperson further said.

NSEL, with the help of 63 moons, has been continuously striving to recover the default amount from the 22 defaulting entities, which has resulted in obtaining the decree of Rs 3,365 crore and crystallization of liability by the High Court Committee to the tune of over Rs 900 crore, which is pending confirmation by the HC, and an injunction of Rs 4,515 crore.

The Government of Maharashtra, based on the suggestion received from the Ministry of Finance, Govt of India, via a letter dated 20 August 2018 had instructed the CA and EOW, Mumbai, via a letter dated 1 September 2018 that payments may be made to small claimants with an outstanding amount tanging between Rs 2 lakh and Rs 10 lakh.