Investors’ group allowed to intervene in NSEL case

Special court allows NSEL Investor Action Group to assist in liquidating properties worth ₹2,000 crore in NSEL scam case, with limitations.

A special court has allowed an association of investors to assist the prosecution in liquidation of attached properties worth about ₹2,000 crore belonging to erstwhile National Spot Exchange Limited (NSEL).

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The court, set up under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, asked the association, NSEL Investor Action Group (NIAG), to file written notes for arguments and even make oral submissions but with a rider that the court will decide what is crucial and critical.

The court further directed the intervenor (NIAG) to refrain from leading the evidence and from pressuring the public prosecutor.

The NSEL scam, which came to light in 2013, involves defrauding 13,000 investors of ₹5,574 crore after inducing them to trade on the NSEL platform, creating forged documents and falsified accounts, and thus committing a criminal breach of trust.

On October 24, 2013, the Economic Offences Wing of Mumbai police invoked provisions of the MPID Act claiming that the money collected by NSEL from the investors was “deposits”. Thereafter, 63 Moons Technologies Limited was roped in the case since its subsidiary NSEL did not have sufficient money or property to return the deposits or make repayments to the investors. The collector of Mumbai City issued several notifications to 63 Moons under section 4 of the Act, asking it to make repayments to the investors. 63 Moons approached the special court challenging the validity of the notifications.

NIAG filed an application in the court on grounds that it was formed to protect the interest of investors aggrieved by the NSEL scam and hence, should be allowed to intervene.

“NIAG apprehends that the state of Maharashtra may further drag its feet in attaching, prosecuting the applications pending before the court, to crystallise the attachment of the properties. On these and other grounds, it is contended that NIAG has unbridled right to participate in the present proceedings and ultimately prayed that they may be allowed to intervene,” the NIAG application said.

The application further claimed that there would be no floodgates open for interventions, considering NIAG was the only organisation who had taken up the matter of NSEL scam, even till the apex court,

63 Moons, however, opposed NIAG’s application stating that there is possibility of unscrupulous elements intervening in the garb of representing the interest of the alleged traders for their vested interests. It further submitted that no documents were produced in support of the application to show that aggrieved traders were members of the intervener.

“Merely because the intervener was allowed to make submissions in some NSEL-related matter, it does not mean that the intervener has inherent right to intervene in each and every matter related to NSEL. The present application is filed to unnecessarily delay the hearing,” the advocate, representing 63 Moons Technologies Limited, said, adding the intervener was neither the first informant nor a necessary party.

Rebutting the objections, NIAG claimed it was a necessary party and that it was also a victim as they had suffered heavy losses due to the alleged act or omission of the accused in the MPID case.

After hearing the arguments by both sides, special judge VP Desai said NIAG formed a small part of the 13,000 aggrieved investors. “If each and every investor/depositor wants to intervene, it will become practically impossible for the court to proceed, conclude and take this case to its logical end. However, considering the entire history of this case, where NIAG has been pursuing the matter for the last 6 to 7 years, opportunity needs to be given to them to assist the prosecution,” the judge said.

However, the liberty, as claimed by NIAG, was not unbridled, the court added.