MUMBAI: Calling curtains on one of the biggest financial crises in India’s commodity markets, the National Company Law Tribunal (NCLT) on Friday approved a one-time settlement proposed by the National Spot Exchange Limited (NSEL), under which 5,682 traders would get ₹1,950 crore in proportion to their outstanding dues as on July 31, 2024.
The case relates to a large-scale fraud uncovered in July 2013, when NSEL defaulted on payments to investors, amounting to ₹5,600 crore. The commodities exchange was meant to function as an e-mandi for farmers, eliminating middlemen and introducing price transparency. Instead, the NSEL management allegedly colluded with a group of sellers to effect trades based on commodities that did not exist. They defrauded around 13,000 investors to the tune of ₹5,600 crore.
A decade on, the one-time settlement approved by the Mumbai bench of the NCLT offers a payout to investors for outstanding dues incurred. The settlement is expected to result in the closure of all legal cases against NSEL, including criminal cases initiated by the Economic Offences Wing (EOW) of the Mumbai police and the Enforcement Directorate (ED).
The settlement, under section 230-1(b) of the Companies Act, is backed by NSEL’s parent company, 63 Moons Technologies Ltd. In a statement issued on Friday, NSEL called the one-time settlement “historic”.
Referencing an earlier payout of ₹179 crore to 7,053 smaller traders with an outstanding of less than ₹10 lakh, NSEL, said, “63 Moons has once again stood up for the cause of traders despite no money trail to NSEL, 63 moons and its promoters.”
Neeraj Sharma, managing director and chief executive officer of NSEL, said, “This would not have been possible without the positive approach of the present BJP government (central and state) in resolving the crisis, which was not resolved by P Chidambaram and the UPA 2 government for reasons best known to them.”
The massive fraud led to NSEL’s collapse in 2013. While some payouts were made over the years, larger investors awaited a final settlement.
The latest proposal was introduced in November 2024. The NCLT in an April 8 order had directed an e-voting process on the proposed settlement. The process concluded on May 17, when the proposal was put to vote by the NCLT – an overwhelming majority of 92.81% of the traders, and 91.35% in value, voted in favour of the one-time settlement, NSEL said.
However, the ED had opposed the scheme on grounds that the settlement figure of ₹1,950 was too small vis-à-vis the value of the assets attached by it in the case, pegged at ₹3,433 crore.
The ED had filed seven charge-sheets against NSEL, various defaulters and broking entities, while NSEL has denied all charges of wrongdoing.
The ED’s probe, based on the EOW’s September 30, 2013 First Information Report (FIR), revealed that the accused had hatched a criminal conspiracy to defraud investors, induced them to trade on the NSEL platform, created forged documents like bogus warehouse receipts, falsified accounts and thereby committed criminal breach of trust to defraud them.
While the NSEL platform allowed sellers to trade in commodities that did not exist, the money collected from investors was allegedly diverted for investment in real estate, repayment of outstanding debts and other activities, ED sources said.
The ED’s Mumbai unit, as part of its investigation, had provisionally attached immovable assets, including immovable properties in Mumbai, Delhi and Rajasthan, owned by various defaulters of NSEL.
In September 2016, ED had also provisionally attached properties of 63 Moons Technologies Ltd, in the form of bonds and securities. The company, earlier known as “FTIL”, holds 99.99% shares of NSEL, according to the ED.