NSEL case: MPID court declares 16 broking firms as financial establishments

Mumbai, April 30 Noting that NSEL brokers have accepted money from investors and failed to repay them as promised by the brokers, the Maharashtra Protection of Investors' Deposits (MPID) court has declared 16 broking firms as financial establishments in the 5,600 crore National Spot Exchange Ltd (NSEL) case.

Interestingly, for the first time, the brokers and the brokerage firms have been declared as financial establishments by the MPID court.

The money and brokers respectively fall under the definition of Sec. 2 (c) and 2(d) MPID Act., i.e. Deposit Taking and Financial Establishment. Therefore, these brokers are deemed financial establishments as per the MPID Act.

These brokers are Motilal Oswal Commodities Brokers, Philip Commodities India Pvt Ltd, Nirmal Bang Commodities Pvt Ltd, Suresh Rathi Commodities Pvt. Ltd, JM Financial Commtrade Ltd, Systematix Commodities Services Pvt. Ltd, Arihant Futures & Commodities Ltd, Ventura Commodities Pvt. Ltd, Latin Manharlal Commodities Pvt. Ltd, K. R. Choksey Commodity Brokers Pvt. Ltd, Almondz Commodities Pvt. Ltd, R.K. Global Commodity Broking Ltd, Roongta Comtrade Pvt. Ltd, CD Commosearch Pvt. Ltd, Alpha Commodity Pvt. Ltd, and Vibrant Commodities Trading Pvt. Ltd.

The consequence of the MPID court's observation is that the state government is now free to attach properties of brokers which have been declared financial establishments by the MPID court.

Earlier, the MPID court summoned 16 brokers and their respective directors, totalling 49 persons and entities, after taking cognizance of the 11 chargesheets by the Economic Offences Wing (EOW) of Mumbai Police on April 18, 2024.

Meanwhile, the MPID court has ordered these entities to furnish cash bonds of Rs 50,000 and not to travel out of the country without informing the court.

Notably, in its chargesheet of December 2, 2022, the Mumbai EOW observed that brokers misrepresented their clients with wrongful, misleading statements leading to enticement for investments in NSEL products.

It also noted that the brokers misled their investors/clients by assuring risk-free returns, and through presentation, marketing materials, brochures, or word of mouth induced the investors/clients to trade on the NSEL platform by offering risk-free returns.

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