TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 999
X X X X Extracts X X X X
X X X X Extracts X X X X
....Adjudicating Authority, confirming the Provisional Attachment Orders (for short 'PAOs') passed by Respondent no.1 - ED attaching the properties of the Page 3 of 101 appellant‟ s parent company "63 Moons Technologies ltd" (formally known as Financial Technologies India Ltd.) to the tune of Rs. 1348.6 Crores:- (i) Order dated 09.03.2017 confirming PAO no. 17/16 dated 14.09.2016 in OC no. 645/16 (Appeal no. 1739/2017). (ii) Order dated 22.03.2017 confirming PAO no. 19/16 dated 30.09.2016 in OC no. 663/16 (Appeal no. 1738/2017). (iii) Order dated 14.07.2017 confirming PAO no. 1/17 dated 31.01.2017 in OC no. 697/17 (Appeal no. 1862/2017) (collectively "Impugned orders") 2. The second set of appeals bearing no. 1735/2017, 1736/2017 and 1860/2017 have been filed by "63 Moons Technologies Ltd." (for short "63 MTL"). With regard to the allegations of ED, the same will be tested at the time of trial under the schedule offence and PMLA. The charges are yet to be framed. In the meanwhile, '63 MTL' and Jignesh Shah & his family members are restrained not to sell, alienate or to create any third party rights in their assets till the final order is passed. Shri Jignesh Shah and h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t under Sec. 31C (2) (B) of the Agricultural Produce Markets Act, 2007. The relevant authority under the Agricultural Produce Markets Act, 2007, directed that NSEL should neither be a subsidiary nor have as its shareholders, a commodity exchange recognized under FCRA. Accordingly, the shareholding of MCX [a recognized commodities exchange under the Forward Contract Regulation Act, 1952 (hereinafter referred as 'FCRA' )] and its nominees were transferred to FTIL. It is the claim of NSEL that it was managed by a well-qualified and experienced MD & CEO and a group of senior officials having adequate experience in commodities markets. At the relevant time Mr. Anjani Sinha was NSEL's MD & CEO. It was alleged that NSEL functions from a separate office with a separate infrastructure and was not run as a division/department of NSEL but as an independent subsidiary. 7. Out of a Board comprising of 8 Directors, only 2 Directors (Mr. Jignesh Shah & Mr. Ramnathan Devrajan) were also Directors of the '63 MTL'. Both these Directors were non-executive Directors of NSEL. It is submitted that in pursuant to the listing agreement, NSEL became a subsidiary of the '63 MTL' & in compliance with the P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ocation Report, which was based on a Warehouse Receipt issued by NSEL, representing the commodities deposited in the warehouse. ii) In the second leg of the transaction, the Trading Client (through its Trading Member Broker), would sell back to the same Commodity Seller the same commodity which had been earlier purchased in the T+2 contract (by handing over the same Delivery Allocation Report), for which the Commodity Seller was required to pay the purchase price and the Trading Client was required to deliver the requisite commodity within 25 days of the contract date (the "T+25 contract"). iii) As the contracts were paired, actual physical delivery of the specified commodity in the T+2 contract was not taken instead the parties traded on the basis of the Delivery Allocation Report issued by NSEL. The Delivery Allocation Report was surrendered in the T+25 contract in lieu of delivery of the sold commodity by the Trading Client (through its Trading Member Broker), to the original Commodity Seller. 11. As per by law 7.9.2: No doubt, it was stipulated that "........The Exchange however, shall not be responsible for the performance of such contracts. If any party to such contra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o. 2 and others. 18. Based on the FIR, both the Economic Offences Wing of the Mumbai Police ("EOW") as well as the Enforcement Directorate initiated investigations under the provisions of the Maharashtra Protection of Interest of Depositors (in Financial Establishment) Act, 1999 and the Prevention of Money Laundering Act, 2002. 19. Enforcement Case Information Report (ECIR) No. 14/MZO/2013 was registered on 14.10.2013 against Respondent No.2, Directors and key officials of NSFL and 25 defaulters for investigation under PMLA Act. Appellant ('63 MTL' ) is neither mentioned as an accused, nor is there any allegation made qua it in the said ECIR. On 30.03.2015 a Prosecution Complaint was filed against NSEL and 67 others before the competent Special Court, PMLA. Subsequently on 27.07.2018, a supplementary Prosecution Complaint was filed against the Appellant before competent Special Court, PMLA. 20. Bombay City Civil on 27.11.2013 passed an Order in R.A. No. 5 of 2013 in C.R. 89/2013 (proceedings initiated under the MPID Act), rejecting bail to Nilesh Patel, Promoter/ Director of N.K. Proteins, declared a Defaulter of NSEL. The Court observed that "it prima facie appears that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t possible and competitive rates. NSEL undertook to provide services like quality certification, storage of goods and other customized value added service. NSEL allowed trades on various contracts with settlement cycle ranging from T+0 to T+36 days. Contracts were settled by delivery and payment after trade date referred herein above as "T". There were some contracts of the same commodity wherein members enter into a buy contract in T+1, T+2, T+3 and simultaneously enter into reverse contract in T+25 or T+34 or T+36. The Plant owners who needed funds against their stock inventory used to sell it on exchange platform on short duration contracts. Simultaneously, they bought same quantity of commodity under along duration contract on the same day, thereby ensuring that the stock remained with them by way of re-purchase. Simultaneously, the buyer of the short duration contract sold in long duration contract at a higher price thereby getting profit on its investment for a period of 30 - 35 days. Since, the purchase & sale of goods were done through transfer of warehouse receipts, investor did not have any botheration to take delivery of the commodity or worry about the quality/quantity ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....key management officials of NSEL and their statements were recorded under section 50of the PMLA, 2002. The gist of their depositions is as under:- (i) Shri Anjani Sinha, the former MD & CEO of NSEL, had vide his letter dated 09.2013 forwarded a copy of his affidavit dated 11.09.2013 regarding matters concerning NSEL. He had stated in his affidavit that he and his managing staff were solely responsible for the crisis at NSEL; that the defaulting members had in connivance with the employees of NSEL siphoned off the funds received from NSEL; that such funds were diverted to acquire real estate, repay existing loans, plant expansion, etc. Accordingly, statement of Shri Anjani Sinha was recorded under the provisions of Section 50 of the Prevention of Money Laundering Act, 2002 on 16.10.2013, wherein, he admitted the contents of his affidavit dated 11.09.2013 and stated that NSEL was a spot exchange organizing delivery based transactions between various buyers and sellers through electronic network spread in 17 states across the country; that it had appointed members, who executed transactions on behalf of their clients; that NSEL project was launched on 10thFebruary, 2005, and later ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the offer letters submitted by the defaulting parties to the Exchange at the time of sale of stock were not backed by physical stock. (iv) In order to ascertain the veracity of the claim made by Shri Anjani Sinha in his statement with regard to manipulation of the stock by defaulting members, statement of Shri Bihari Lal, Assistant Manager, Warehousing Department of NSEL was recorded under Section 50 of PMLA, 2002, on 26.10.2013. He inter-alia explained the activities of warehousing department in detail and stated that the selling members used to send stock offer letters on daily basis by e-mail to NSEL stating that the total quantity of goods traded on that day had been delivered to the designated warehouses. (v) Shri Jai Bahukhandi, Ex-Assistant Vice President of NSEL: During his statement recorded on 10.04.2014, he stated that he was responsible for all warehousing functions of NSEL; that he used to receive instructions directly from Shri Anjani Sinha, MD & CEO of NSEL. He admitted that he was aware about the non-existence of underlying stock and trading at NSEL without the corresponding stock. (vi) Statement of Shri Amit Mukherjee, Assistant Vice- President, Busi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... during which he inter-alia stated that he had founded Financial Technologies India Limited which used to deal in exchange software business; that his shareholding in FTIL through his family holding company i.e. La-fin (27%) and individually 18%; that NSEL was a spot exchange organizing delivery based transactions between various sellers and buyers through electronic network spread across the country; that he was the non-executive Vice- Chairman of NSEL; that the Board of Directors used to interact only with the Managing Director of NSEL; that Shri Anjani Sinha, Managing Director of NSEL was given a free hand to run the company; that NSEL was a loss making company for four years; that when NSEL started earning income especially from 2010-11, the Board had not made any specific inquiries regarding its reasoning; that Shri Anjani Sinha, MD & CEO of NSEL, Shri Amit Mukherjee and their team was responsible for the growth of NSEL business; that the contracts of NSEL were launched by way of circulars; that the MD & CEO was the final authority to launch the contracts; that during the board meetings, the particulars of circulars launched since the last meeting were just informed to the boa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... details available with .... With regard to actual nature of services provided by IBMA to LOIL group; that IBMA had also received Rs. 10 Crores from Mohan Infracon Pvt Ltd, a group company of one of the defaulter i.e. Mohan India group; that the said funds were not labeled as income from trade as there is no corresponding business transaction with the said company Mohan Infracon Pvt Ltd; that this amount later adjusted towards liability; that Anjani Sinha was holding independent charge of NSEL & IBMA; that however, he was answerable to Board of Director of FTIL whom he was submitting quarterly compliance reports. (iii) Shri Mukesh P Shah, internal auditor of NSEL from 2009-10 to 2011-12 and the statutory auditor from 2007-08 to 2008-09 and 2012-13- During statement recorded on 20.10.2015, he stated that he had received detailed management representation letter which also confirmed to adherence of applicable laws by the company, that he had also relied on quarterly compliance report given to FTIL; that the entire management of NSEL actively connived and perpetuated the fraud; that data was made up and reports generated from the lower levels to the top management level, by whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom NSEL were utilized in their business activities. (iv) Shri Narayan Nageswara Rao, Managing Director of NCS Sugar Mills Ltd. - During his statements recorded on 14.05.2015 & 19.05.2015 , he deposed that M/s NCS Sugars Ltd had sold sugar through contracts launched on the NSEL platform without having corresponding physical stock of the same; that the said sale transactions were only paper transactions; that the funds received from NSEL through such bogus sale transactions were diverted for the purpose business needs including purchase of raw materials, payment of bank loans & interest, capital expenditure required for the plant, payment of taxes, etc. (v) Shri Inder Singh. Director of M/s Namdhari Food International Pvt Ltd: - During his statement recorded on 20.01.2015, Shri Inder Singh claimed that they had delivered equivalent quantities of stock of paddy to the NSEL designated godowns at the time of their T+2 transactions, however, when confronted with the income tax verification report that stock of only Rs. 2 Crores was found lying at the godowns, he claimed that NSEL shifted the stock, though the godowns were effectively under their control. When confronted with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e), his wife (Smt. Bonhi Mukherjee), children, parents & some other relatives that he booked the trip to Bangkok in April, 2013, through a travel agent M/s Vishwas Travels Delhi, and paid an amount of approx. Rs. 7 Lakhs from the account of M/s Prime Zone Developers Pvt. Ltd. towards air tickets and hotel charges for the said trip of around 7-8 days. viii) Shri Ghanta Kamesware Rao, Director of Spincot Textiles Pvt. Ltd.- During his statement recorded on 11.07.2014 & 21.07.2014he submitted that no equivalent stocks were either maintained or delivered to the said NSEL designated godowns and trade was carried out on the basis 'of paper transactions declaring M/s Spincot Textiles Pvt Ltd as the seller of the goods in T+ 2 contracts and M/s BSPN Exports Pvt Ltd as the purchaser of the said goods in corresponding T+25 contracts; that the funds received from NSEL were utilized towards repayment of their earlier bank loans and towards purchase of raw materials and other business needs relating to their cotton plant. (ix) Shri Nilesh Patel, the Managing Director of M/s N K Proteins Ltd and the N K Group of Industries - - During his statements recorded on 20.05.2014, 03.07.2014, 0....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ne of their clients as the seller of the goods in T+ 2 contracts and another as the purchaser of the said goods in corresponding T+25 contracts; that the funds received from NSEL were utilized towards their business needs including purchase of raw materials, payment of bank loans & interest, capital expenditure, payment of taxes, etc. (xii) Shri Gaqan Suri, Director of Yathuri Associates- - During his statement recorded on 04.03.2014 and 08.03.2014, he disclosed that his firm was controlled by his brother in law, Shri Onkar Anand; that he used to get around Rs. 1 lakh to Rs. 1.50 lakh per month from Shri Onkar Anand. (xiii) Shri Onkar Anand. Director of Rahul Sales and Narainqarh Sugar Mills - - During his statement recorded on 12.03.2014, he submitted that he was approached by an acquaintance Shri Sanjeev Bhasin, who informed him that funds from NSEL were available for a 5 year period, if a company becomes member of NSEL, a commodity trading exchange; that Shri Sanjiv Bhasin claimed that he can manage around Rs. 1000 crores from NSEL for a period of 5 years on an interest @ 15% to 15.5%; that as they were always in requirement of funding, the proposal seemed to be very lucra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng Director of the Appellant; (iii) Retired Judge of the Hon‟ble Supreme Court and (iv) A nominee of the Union of India inter-alia to monitor and approve treasury operations of the Appellant. The Retired Judge of the Hon‟ble Supreme Court and nominee of the Union of India have individual veto powers in the NCLT Committee. By order dated June, 2018, NCLT disposed of the C.P. No. 1 of 2015. The said order has been challenged by '63 MTL' as well as UOI and the same is pending adjudication before the NCLAT. Vide order dated 27.06.2018, NCLAT has stayed the order dated 04.06.2018 and continued the aforesaid interim arrangement. 31. EOW on 18.07.2016 directed the Appellant not to dispose of, alienate, encumber, part with possession of or create any third party right, title and/or interest in, to, upon or in respect of any assets of the Appellant. 32. Special Judge, PMLA in PMLA Spl. Case No. 4/2015 granted bail to chairman and MD of the Appellant on 6.8.2016. 33. On 9.8.2016, on the basis of certain newspaper reports suggesting the likelihood of ED attaching the assets of the "63 MTL‟, a letter was addressed by the appellant to ED requesting not to take an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the ED was well aware about the filing about the said Writ Petition. 41. NCLT Committee in its meeting approved the treasury operations of the "63 MTL‟. The said approval also included the liquidation of some of the investments which were part of the Provisional Attachment Order No.17/2016 and reinvestment of the same in other instruments is obtained. Pursuant to the approval given by the NCLT Committee, '63 MTL' issued instructions on 15/16.9.2016 to various Financial Institutions for the liquidation of some of the investments and reinvestment of the same in other instruments. 42. In the meanwhile, Provisional Attachment Order bearing PAO No.17 of 2016 dated 14.09.2016, was served on the Appellant on 20.09.2016. 43. It is stated on behalf of '63 MTL' that in '63 MTL' the absence of any communication from the Complainant or the knowledge of the issuance of the 1stPAO, which admittedly was dispatched by the Complainant only on 16.09.2016 by post at 18:51 Hrs, '63 MTL' in keeping with practice of prudential financial management of the liquid assets, had liquidated some of the investments which were part of the PAO and had reinvested the same in other instruments (viz Bo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mplaint before the Adjudicating Authority. 50. Complaint along with the relied upon documents finally came to be served upon the '63 MTL' on 8.12.2016. They filed its reply to the Show Cause Notice dated 09.11.16 in O.C. No.663/16 and they also filed two Miscellaneous Applications seeking copy of the Relied Upon Documents and also for Cross-Examination of certain persons. 51. Adjudicating Authority allowed 1st OC No. 645/16, confirming 1st PAO i.e. PAO 17/16 on 9.3.2017. 52. Adjudicating Authority allowed 2nd OC No. 663/16, confirming 2nd PAO i.e. PAO 19/16 on 22.3.2017. 53. PAO No.1 of 2017 was issued by the Respondent No.1 on 30.01.2017 attaching the investment in bonds belonging to the '63 MTL' having a face value of Rs. 135. PAO 1/17, PAO17/16 and PAO19/16 are issued based largely on the same set of facts, as stated on behalf of '63 MTL' against them and founded on the same premise for attachment. 54. Pursuant to 3rd PAO, Complaint being O.C. No. 697/17 was filed before the Adjudicating Authority on 28.02.2017. SCN u/s 8(1) of PMLA was issued by the Adjudicating Authority, PMLA in 3rd OC on 6.3.2017. 3rd OC along with RUD served upon the '63 MTL' on 29.03.2017 who fil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the investigation by R-1 culminating in the Complaint No. 4 of 2015, have revealed the true and different picture that the entire fraud was perpetrated by the 24 defaulters who abused the trading platform provided by the Appellant by colluding with few employees of the Appellant. All this material and findings of investigation were placed on record by the Appellant in its reply before the Adjudicating Authority. However, the Adjudicating Authority failed to consider the same and went on to record adverse findings against the Appellant majorly based on the FMC Order. It is stated that FMC Order was passed in a completely different context, under a completely different legal regime of the Forward Contracts (Regulation) Act, 1952 ("FCRA") and with a completely different purpose. The findings therein could not have been used by the Adjudicating Authority on face value without any independent application of mind of its own to the material produced on record by the Appellant along with its reply. b) The entire gross total income of NSEL for the period of FY 2008- 09 to FY 2013-14 has been sweepingly characterised by R-1 as the alleged "proceeds of crime" without going at all into th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er Contracts. The only contracts where payment defaults of more than Rs. 5,000 Crores have occurred and which are the subject matter of the Scheduled Offences registered vide the EOW-FIR and under investigation by the Complainant ED (as is evident from Para 6.1 and 6.2 of the Complaint itself), are the Traders‟ Contracts, and that NSEL's gross income for the period of FY 2008-09 to FY 2013-14 from the Traders‟ Contracts was only Rs. 245.81 Crores. The balance income of NSEL from the Exchange Business for the period of FY 2008-09 to FY 2013-14 being Rs. 129.50 Crores was derived from contracts other than Traders‟ Contracts (such as e-Series contracts, farmers‟ contracts etc.) - all of which admittedly are not the subject matter of any Scheduled Offence as is evident from Para 6.1 and 6.2 of the Complaint itself. f) The Adjudicating Authority failed to appreciate that even within NSEL's gross income of Rs. 245.81 Crores from the Traders‟ Contracts, income of only Rs. 131.73 Crores has been earned by NSEL from the defaulting members. The balance income of Rs. 114.08 Crores has been earned by NSEL from the nondefaulting members. Hence, the income of Rs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the instant case, and accordingly NSEL cannot be said to be recipient of any alleged "proceeds of crime" as defined under Section 2(1)(u) of the PMLA. In absence of any proceeds of crime being traced to the Appellant, the Respondent had no jurisdiction to pass the PAO under Section 5 of the PMLA either against the Appellant or against its parent company. h) The Adjudicating Authority failed to appreciate that Para 7.1 of the Complaint (which corresponds to Para 8 of the PAO) contains incorrect facts contrary to the record. Para 7.1 states that, "on going through the report received from IT Dept., it was observed that no equivalent stock was found in any of the godowns of the defaulters." This is completely contrary to the record available with the Complainant inasmuch as the report of the IT Dept. at pages 19 and 20 of Vol. 1 of the RUD clearly states that at least in case of the godowns of 3 defaulters, namely Sankhya Investments, Metcore Alloys & Industries Ltd. and Topworth Steels & Power Ltd., adequate stock of commodities was found. It is further stated in Para 7.1 of the Complaint that, "similarly, audit conducted by SGS India Pvt. Ltd. the agency contracted by NSEL, al....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of law has held till date that NSEL was in violation of the Exemption Notification dated 05.06.2007. j) The Adjudicating Authority failed to appreciate that in terms of Section 2(c) of the FCRA, a Forward Contract is a contract for delivery of goods which is not a Ready Delivery Contract. A Ready Delivery (or a Spot) Contract is defined under Section 2(i) of the FCRA as a contract which provides for delivery of goods and payment of price within 11 days after the date of the contract. However, the proviso to Section 2(i) of the FCRA clearly states that if a contract for buying or selling of commodities is performed by tendering of document of title to goods; or by the realisation of difference between the contract rate and the settlement rate i.e. by netting-off, then it shall not be deemed to be a Ready Delivery Con- tract. In other words, if a contract for buying or selling of commodities is performed by tendering of document of title to goods; or by the realisation of difference between the contract rate and the settlement rate i.e. by netting-off, then it shall ipso facto become a Forward Contract irrespective of the fact whether it is settled within 11 days or more. Since N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hatsoever in the same and was never involved in making any presentations or assurances about the business model or products of NSEL. Further, NSEL never promoted pairing of contracts for fixed returns. On the contrary, NSEL - vide its Circulars dated 07.02.2012 and 06.08.2012- had prohibited its members from issuing any advertisement which promised fixed return. Further the findings of the Ld. Adjudicating Authority are also contradictory to the Complaint dated 30.03.2015 filed by the Complainant under Section 45 of the PMLA before the Special Court (which is part of the RUD) wherein Mr. Jignesh Shah has been accused only of negligence in his basic function as a Board member of checks and balance and allowing a free hand to Mr. Anjani Sinha. In the said complaint filed by the Complainant ED before the PMLA Court, there are no allegations of Mr Jignesh Shah being involved in the day to day affairs of NSEL. l) The Adjudicating Authority failed to appreciate that the circulars launching the various contracts for trading on NSEL's exchange platform were never discussed, ratified and approved by the Board of NSEL. The correct factual position is that the circulars launching the vario....
X X X X Extracts X X X X
X X X X Extracts X X X X
....so failed to appreciate that FTIL did not approve the actions of NSEL in its board meetings. The factual position is that when NSEL became a "material subsidiary‟ of FTIL in April 2011, then as per the Listing Agreement, the already approved final minutes of the board of NSEL were started being placed on post-facto basis in the board meetings of FTIL only for the purpose of noting and not for the purpose of any approval as alleged. It is pertinent to mention that the so called "paired contracts‟ were launched in September 2009 i.e. much before April 2011 when NSEL's Board minutes started getting placed for noting before the Board of FTIL. It may further be noted that in the Affidavit dated 11.09.2013 (Sr. No. 4 of the RUD) of Mr. Anjani Sinha the then MD and CEO of NSEL which has been confirmed by him in his statement dated 16.10.2013 before R-1 (Sr. No. 5 of the RUD), Mr. Sinha has clearly stated that the policy decisions regarding NSEL were taken by him exclusively and as such the facts pertaining to the missing stocks, increasing exposure and widespread default were admittedly not within the knowledge of even the Board of NSEL. The fact that the Board of NSEL was not....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... questioned by the Board - confirmed to the entire Board that commodities worth more than Rs. 6,000 Crores are lying in various warehouses and there is no cause to worry. (ii) Email dated August 4, 2013 sent by Mr. Sinha in his capacity as the MD&CEO of NSEL to the regulator FMC, wherein he had sent an excel sheet to FMC confirming that stock worth more than Rs. 6,000 Crores were there in various warehouses. The excel sheet contained warehouse-wise stock position. (iii) Mr. Sinha maintained that there was sufficient stock even in his interviews to the print and electronic media (live TV interview) in the first week of August 2013. (iv) However, when reports of missing stock started coming in, the Board of NSEL appointed an internationally reputed firm SGS to conduct physical verification of stock at all the warehouses across India. The Board of NSEL came to know about the shortage of stocks only when SGS's audit report of physical verification of stock position in various warehouses started to come out in mid-August 2013. This is also corroborated by the statement of Mr Shreekant Javalgekar to the Complainant (Sr. No. 10 of the RUD) (v) On getting to know that there was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6.5 Crores was withdrawn by the Appellant out of the SGF to repay the overdraft facility provided by HDFC Bank to the Appellant. The said overdraft facility was used by the Appellant for making payment for purchase of cotton from farmers as part of the procurement services provided by the Appellant to NAFED which is a Govt. of India undertaking. In fact, the entire amount of Rs. 236 Crores was replenished by the Appellant back into the SGF by 25.04.2013, as is evident from the Chartered Accountant's Certificate dated 08.12.2016 annexed with the Reply filed by the Appellant before the Ld. Adjudicating Authority. Thus, it is clear that the withdrawal of Rs. 236.5 Crores by the Appellant from its SGF was "temporary‟ and was for a legitimate business purpose. The Appellant never intended to siphon off the said amount of Rs. 236.5 Crores from the SGF which is evident from the fact that the said amount was replenished in the SGF by the Appellant within 1 (one) month i.e. by 25.04.2013. Thereafter, the entire SGF was utilised for payout to members against their unsettled trades in July 2013 - which was the purpose for which the SGF was meant as per the bye laws of the exchange. It i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wal of PD Agro group etc.) also confirm that initially these defaulting members used to deliver the goods to NSEL-designated warehouses. It is only subsequently on being told by some staff members of NSEL not to bother about keeping the stock that they stopped depositing the goods in NSEL's designated warehouses. Had the very business model of NSEL required only "paper transactions‟ as alleged in the Complaint then where was the need for these defaulting members to even deliver the commodities to NSEL's designated warehouses even initially. Thus, the sweeping generalization by the Complainant that the entire trading on NSEL's exchange platform was merely "paper transactions‟ based on "nonexistent/ fictitious stock‟ is contrary to the material on record and hence liable to be rejected. s) The Adjudicating Authority failed to appreciate that the theory of the Complainant that there was never any stock of commodities and NSEL's business model was only "paper transactions‟ is also belied by the following Court Orders directing sale of stock of commodities found in various warehouses of the defaulters: (i) Vide Order dated 19.05.2015, the Hon‟ble Bomb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ie view, has failed to appreciate a number of documents brought on record by the Appellant and has gone against the mandate of Section 8(2). The Adjudicating Authority has instead only reiterated the prima facie view taken by R-1 while issuing the PAO and simply omitted to determine if the attached properties were involved in money laundering as mandated under Section 8 of the PMLA. 64. It is submitted that it is wrongly recorded and given its findings in the Impugned Order about the involvement of the Appellants in the defaults that took place on its trading platform, without any authority, to conclude that the Appellants were fully responsible for the said default. It is submitted that the aforesaid findings are beyond the scope of adjudication under Section 8(2) wherein the Adjudicating Authority is only required to determine the validity of the attachment order passed under Section 5(1) and the involvement of the property attached under Section 5 in money laundering. Contrary to the aforesaid mandate the Adjudicating Authority under the Impugned Order has transgressed its jurisdiction to usurp the jurisdiction vested with the Special Court under Section 44 and made findings o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i.e 45% i.e equivalent to attachment of this directorate. This Directorate has not attached complete assets of FTIL of 2800 Crores. It may be noted here that Jignesh Shah has complete control over affairs of FTIL. Further, he was on board of FTIL which approved new paired contract launched at NSEL platform; these contracts were contrary to the approvals given to NSEL by the Government. From the facts above, it is clear that FTIL is fully responsible for the functioning of NSEL and Board of Directors of NSEL was aware about the situation at NSEL. Board of NSEL consisting Key Management Personnel of FTIL allowed to continue to trade in spite of repeated defaults and turned a blind eye towards non-existence of the stock. As such, FTIL also connived with NSEL and as such, FTIL was in possession of the said proceeds of crime. Therefore, properties only worth Rs. 1254 crores of FTIL, not complete investment in the accounts of FTIL i.e more than 2500 Crores were attached under section 5(1) of the PMLA and were confirmed by the Adjudicating Authority. Further, the conduct of the defendant in siphoning off the properties, even after attachment, made it clear that the said properties were ne....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the board meeting comprising key Management Personals of FTIL in the Board of NSEL and the board used to ratify and approve the same. By virtue of its shareholding of 99.99% in NSEL, FTIL has complete authority over all the affairs of NSEL enabling it to appoint all the Directors on the board of NSEL, through them effective control over the functioning of NSEL. The NSEL board comprising Key Management Personals of FTIL (as S/Shri Jignesh Shah, Joseph Messy) has all the authority to frame the bye-laws, rules and regulations of the company. FTIL regularly approved the actions of NSEL in its Board meetings. From the facts above, it is clear that FTIL is fully responsible for the functioning of NSEL & Board of Directors of NSEL was aware about the situation at NSEL. Board of NSEL consisting Key Management Personnel of FTIL allowed to continue to trade in spite of repeated defaults and turned a blind eye towards non-existence of the stock. In these circumstances where the parent company (FTIL) was using its subsidiary (NSEL) as its agent for sham and illegal transactions, the attachment of the properties of the parent company is permissible under the respective laws. 71. Mr. Awasthi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ain made by the specified criminal activity unless it be not possible to do so by such stage, given the peculiar features or complexities of the case. The confiscation to be eventually ordered, however, must be restricted to the value of illicit gains from the crime. For the sake of convenience, the properties covered by the second and third categories may be referred to as "the alternative attachable property" or "deemed tainted property". 108. Generally, there would be no difficulty in proceeding with the attachment or confiscation of a tainted property respecting which there is material available to show that the same was derived or obtained as a result of criminal activity of specified nature, so long as such property is found held by the person who had indulged in such criminal activity, it amounting to money-laundering, as indeed those who may have aided or abetted such acts. Dispute, however, is likely to arise in relation to attachment or confiscation upon questions being raised at the instance of the person suspected of money-laundering (or his abettor) as to sufficiency of the material or reasons to believe for such action, as indeed of the fairness or propriety of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing always restricted to take over by the Government of illicit gains of crime, the burden of proving facts to the contrary being on the person who so contends." ......................................... .................................... ................................... "160. But, in cases where the enforcement authority seeks to attach other properties, suspecting them to be "proceeds of crime", not on the basis of fact that they are actually "derived or obtained" from criminal activity but because they are of equivalent "value" as to the proceeds of crime which cannot be traced, it is essential that there be some nexus or link between such property on one hand and the person accused of or charged with the offence of moneyFPA- PMLA-1735-1736, 1860, 1738-1739 & 1862/MUM/2017 Page 64 of 101 laundering on the other. In cases of this nature, the person accused of money-laundering must have had an interest in such property at least till the time of engagement in the proscribed criminal activity from which he is stated to have derived or obtained pecuniary benefit which is to be taken away by attachment or confiscation. It is with this view that PMLA provides for a pos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....He submits that it is clear that the provisions of the PMLA override the provisions of any other law being in force. In this case, the other law like Companies Act, the provisions of the PMLA will have overriding effect. 76. It is stated by him that the proceeding initiated by MCA against FTIL are civil in nature whereas the proceedings under PMLA are of criminal nature. It is settled law that the criminal proceedings will override the civil proceedings, if any conflict arises during the implementation of the law. The PMLA is a special law and substantially a penal Act enacted in consonance with international conventions to curb the menace of money laundering. As such, proceedings initiated by MCA have no bearing on the proceedings under any criminal law like PMLA. 77. It is the case of respondent no. 1 that the Respondent No.1 has traced alleged "proceeds of crime" to a tune of Rs. 1254.6 crores to National Spot Exchange Ltd. ("NSEL"). However, since NSEL does not have equivalent assets available for attachment, the Respondent No.1 has, therefore, correctly attached assets of its holding company, the "63 MTL‟. This, despite admittedly that no proceeds of crime have been ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....38.26 5-Feb-18 14 N K Proteins Ltd 968.82 29-Mar-18 15 LOIL Continental Foods Ltd. 720.38 30-Mar-18 16 LOIL Overseas Foods Limited 17 LOIL Health Foods Ltd. 18 Metkore Alloys & Industries Ltd. 98.08 21-Feb-18 19 Namdhari Rice & General Mills 61.52 19-Feb-18 20 Namdhari Food International Pvt. Ltd. 21 Shree Radhey Trading Co 34.59 7-Feb-18 22 Vimladevi Agrotech Ltd 14.02 15-Feb-18 Total 5,431.09 b. Additionally, the Respondent No.1 has attached the properties of the 24 Defaulters to a tune of Rs. 1,740.59 crores. The details of the attachments are as below: VALUE OF PROPERTIES OF DEFAULTERS ATTACHED BY ED Sl.No. Defaulter Value of Attachments (Crores) Total Value of Attachments Prosecution Complaint in PMLA Spl Case. 4 of 2015 dt. 30th March 2015 Prosecution Complaint in PMLA Special Case. 4 of 2016 dt. 21st November 2016 Prosecution Complaint in Supplement ary PMLA Special Case 22 of 2018 dt. 16th July 2018 POA 03/2017 dt. 15th March 2017 1 P D Agro Processors 54.76 177.34 232.1 2 Aastha Minmet India Pvt Ltd 48.88 48.88 3 Mohan India Pvt Ltd 183.33 201.50 &nbs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....US REFINERIES PVT LTD 252.47 21-09-18 252.47 - - 11 JUGGERNAUT PROJECTS LTD. 145.00 23-12-14 - 145.00 - - 12 AASTHA MINMET INDIA PVT LTD 12.50 23-12-14 - 12.50 - 75.57 26-12-18 13 METKORE ALLOYS & INDUSRIES LTD. - 83.46 14-09-18 14 SWASTIK OVERSEAS CORPORATION 91.19 18-12-14 - 91.19 - - 15 WHITE WATER FOODS PVT LTD 84.82 23-07-18 - 84.82 - - 16 NAMDHARI FOOD INT. PVT LTD 51.02 27-02-17 - 17 NAMDHARI RICE & GENERAL MILLS - - 10.39 27-02-17 - 18 NCS SUGARS LIMITED - 58.85 26-03-18 58.85 - - 19 SPIN COT TEXTILES PVT LTD - 36.63 26-03-18 36.63 - - 20 SHREE RADHEY TRADING CO - - - - 21 VIMLADEVI AGROTECH L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and writ petition raises questions as to the applicability and construction of Section 396 of the Companies Act, 1956, which deals with compulsory amalgamation of companies by a Central Government order when this becomes essential in the public interest. The appellant, 63 Moons Technologies Ltd. (hereinafter referred to as "FTIL", which name was changed to 63 Moons Technologies Ltd. on 27.05.2016), is a 99.99% shareholder of the National Spot Exchange Ltd. (hereinafter referred to as "NSEL"), and is a listed company. About 45% of the shareholding of FTIL is held by Shri Jignesh Shah and family, and about 43% of the shareholding is held by members of the Indian public. Approximately 5% of the shareholding is held by institutional investors. FTIL is a profitable company, having a positive net worth of over INR 2500 crore, and is in the business of providing software which is used for trading by brokers and exchanges across the country. FTIL has about 900 employees, and a Board of Directors which is different from the Board of Directors of its wholly owned subsidiary, i.e., NSEL. On the other hand, NSEL 2 was incorporated in 2005 by Multi Commodities Exchanges ["MCX"] and its nomine....
X X X X Extracts X X X X
X X X X Extracts X X X X
....NSEL. On 27.08.2013, the FMC directed a forensic audit of NSEL by Grant Thornton LLP, and the Union of India, on 30.09.2013, ordered inspection of the books of accounts of NSEL and FTIL under Section 209A of the Companies Act. On the same day, the Economic Offences 4 Wing ["EOW"] registered cases against Directors and key management personnel of the NSEL and FTIL, trading members of NSEL, and brokers of NSEL under various provisions of the Indian Penal Code and the Maharashtra Protection of Interest of Depositors Act, 1999 ["MPID Act"]. Several suits were filed by the traders who allegedly have been duped, the most important of which is Suit No.173 of 2014 pending in the Bombay High Court, which is a representative suit filed under Order I Rule 8 of the Code of Civil Procedure, 1908 ["CPC"]. NSEL also filed third-party notices in the said suit for recovery of INR 5600 crore against 24 defaulter traders. It has also filed various arbitration proceedings against them, and is in the process of recovery of INR 3365 crore out of INR 5600 crore, which are in the form of court decrees and arbitration awards. 4. On 17.12.2013, based on the Grant Thornton report dated 21.09.2013, the FMC....
X X X X Extracts X X X X
X X X X Extracts X X X X
....c Affairs, wrote a letter to the Ministry of Corporate Affairs stating that FTIL and NSEL appear to be maintaining separate identities for a fraudulent purpose, i.e., to deprive investors of their money. As a result, there is a need to lift the corporate veil in order to unearth the fraud, as a result of which, amalgamation of two companies, where one has defrauded market participants and the other company is cash-rich and capable of addressing the payment crisis more effectively. It was therefore proposed to merge FTIL and NSEL under Section 396 of the Companies Act. On 21.10.2014, a draft order of amalgamation, made in accordance with Section 396(3) of the Companies Act, was 7 circulated to the relevant stakeholders. As a result, FTIL filed Writ Petition No. 2743 of 2014 on 10.11.2014, in which it challenged the impugned draft order. On 27.11.2014, the Bombay High Court directed the parties to maintain status quo. On 16.12.2014, the Union of India filed an affidavit in reply, categorically confirming that the impugned draft order has been made by the Central Government on the basis of the FMC's proposal dated 18.08.2014. On 04.02.2015, the Bombay High Court vacated the status quo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....houses was valued at INR 6000 crore, all of which turned out to be incorrect. 87 Further, there is no doubt whatsoever that in July, 2013, as a result of NSEL stopping trading on its exchange, a payment crisis of approximately INR 5600 crore arose. The further question that remains is whether, given these facts, the conditions precedent for the applicability of Section 396 were followed. 56.1. What is important to note is that by the time the final order of amalgamation was passed, i.e., on 12.02.2016, the final order itself records: "8.1.Economic Offences Wing, Mumbai: * Total amount due and recoverable from 24 defaulters is Rs. 5689.95 crores. * Injunctions against assets of defaulters worth Rs. 4400.10 crore have been obtained. * Decrees worth Rs. 1233.02 crore have been obtained against 5 defaulters. * Assets worth Rs. 5444.31 crore belonging to the defaulters have been attached of which assets worth Rs. 4654.62 crore have been published in Gazette under the MPID Act for liquidation under the supervision of MPID Court and balance assets worth Rs. 789.69 crore have been attached/secured for attachment by the EOW: * Assets worth Rs. 885.32 crore belonging to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lity aspect of Section 396 at all. In fact, in several places, it refers to "essential public interest" as if "essential" goes with "public interest" instead of being a separate and distinct condition precedent to the exercise of power under Section 396. On facts, therefore, it is clear that the essentiality test, which is the condition precedent to the applicable to Section 396, cannot be said to have been satisfied. 59. When it comes to "public interest" as opposed to the "private interest" of investors/traders, who have not been paid, the amalgamation order dated 12.02.2016 makes interesting reading. The satisfaction as to public interest is stated in the very beginning of the order as follows: "Whereas the Central Government is satisfied that to leverage combined assets, capital and reserves, achieve economy of scale, efficient administration, gainful settlement of rights and liabilities of stakeholders and creditors and to consolidate businesses, ensure coordination in policy, it is essential in the public interest......." 99 What is stated in the opening is repeated in paragraph 2.14.2 as follows: "2.14.2 The Central Government also carefully considered the propos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vide letter dated 18-08- 2014, proposing the merger of NSEL with FTIL by the Central Government under the provisions of Section 396 of the Companies Act, 1956. The proposal has been supported by the Department of Economic Affairs (DEA), Ministry of Finance, FMC has proposed the merger/amalgamation of NSEL with FTIL in essential public interest so that the human/financial resources of FTIL are also directed towards facilitating speedy recovery of dues from the defaulters at NSEL and the FTIL takes responsibility to resolve the payment crisis at NSEL at the earliest. 59.5. So far, we have gone by the Central Government order as it stands. The Bombay High Court, in stating reasons (a), (b), and (c) as grounds of public interest, has gone much further than even the answer given to the objections that are contained in the order itself. "Restoring/safeguarding public confidence in forward contracts and exchanges, which are an integral and essential part of the Indian economy and financial system, by consolidating the businesses of NSEL and FTIL," is not contained in the answer given to objections in the order. First and foremost, restoring public confidence is no part of the order. Wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iving effect to business realities of the case" contained in the answer to objections does not contain "by consolidating the businesses of FTIL and NSEL", nor does it contain "and preventing FTIL from distancing itself from NSEL, which is, even otherwise, its alter ego". On the contrary, the High Court itself mentions, in paragraph 355, that "this is also not a case where the Central Government has, in fact, lifted the corporate veil, despite the alleged non-existence of the circumstances justifying lifting of such corporate veil", and further, "this is not a case where the Central Government has lifted the corporate veil and sought to apportion any liability upon either NSEL or FTIL". For all these reasons, we find that no reasonable body of persons properly instructed in law could possibly arrive at the conclusion that the impugned order has been made in public interest. 72. In fact, the Government order dated 12.02.2016 itself reflects the net worth of NSEL as INR 8.86 crore from its balance sheet dated 31.03.2015, despite its capital being INR 60 crore, inasmuch as the total reserve and surplus is a negative figure of INR 51.54 crore. As against this, FTIL's balance sheet, a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... full stock as collateral; 10-20% of open position as margin money; and that the stock currently held in NSEL's120 warehouses was valued at INR 6000 crores, all of which turned out to be incorrect. Further, there is no doubt whatsoever that in July, 2013, as a result of NSEL stopping trading on its exchange, a payment crisis of approximately INR 5600 crore arose. The further question that remains is whether, given these facts, the conditions precedent for the applicability of Section 396 were followed." 87. It is alleged that the Hon‟ble Court has clearly observed that paired contracts were, in fact, financing transactions which were distinct from sale and purchase transactions in commodities and were, thus, in breach of both the exemptions granted to NSEL, and the FCRA. Further, the Hon‟ble Court also observed that Shri Jignesh Shah, on 10.07.2013, made representations to the DCA and the FMC, in which he stated that NSEL had full stock as collateral; 10-20% of open position as margin money; and that the stock currently held in NSEL's 120 warehouses was valued at INR 6000 crores, all of which turned out to be incorrect. 88. On behalf of the respondent no.1, it is al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tached assets has started. * Bombay High Court has appointed a 3- 95 member committee headed by Mr. Justice (Retd.) V.C. Daga and 2 experts in finance and law to recover and monetize the assets of the defaulters. * Rs. 558.83 crores have been recovered so far, out of which Rs. 379.83 crore have been received/recovered from the defaulters and Rs. 179 crore were disbursed by NSEL to small traders/investors. 8.2. Enforcement Directorate: * * ED has traced proceeds of crime amounting to Rs. 3973.83 crore to the 25 defaulters; * ED has attached assets worth Rs. 837.01 crore belonging to 12 defaulters; * As per the recent amendment in the PMLA, the assets attached by ED can be used for restitution to the victims. 8.3. The above status indicates that the said enforcement agencies are working as per their mandate......." 91. Admittedly, the properties attached are not proceed of crime as defined under Section 2(1)(u) of PMLA. It is submitted on behalf of '63 MTL' that the Directorate of Enforcement/ED attempts to make out a case for attachment of properties of '63 MTL' purely based on a mis-interpretation of the concept of "value of such property‟ as e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... d. With Respect to the contracts launched, circulars etc., only post facto information was given to 63MTL & the minutes of Board meetings of NSEL were placed for noting purposes only in terms of mandate of the listing agreements. e. See: i. Secretarial compliance report Pg.l854/Appeal 1735/III-IV ii. Section 70 PMLA- "Person Incharge" 94. The Hon'ble Supreme Court in its order has mentioned the role of non-executive Director in Pooja Ravinder Devidasani Vs. State of Maharashtra [(2014) 16 SCC 1] as under: 17. There is no dispute that the Appellant, who was wife of the Managing Director, was appointed as a Director of the Company- M/S Elite International Pvt. Ltd. on 1st July, 2004 and had also executed a Letter of Guarantee on 19th January, 2005. The cheques in question were issued during April, 2008 to September, 2008. So far as the dishonor of Cheques is concerned, admittedly the cheques were not signed by the Appellant. There is also no dispute that the Appellant was not the Managing Director but only a nonexecutive Director of the Company. Non-executive Director is no doubt a custodian of the governance of the Company but does not involve in the day- to-day....
X X X X Extracts X X X X
X X X X Extracts X X X X
....;ble Bombay High Court by order dated 12.06.2015 directed the deposit of this amount. Therefore, there would be no issue of doctrine of tracing. 97. The Hon‟ble Delhi High Court in M/s. Himachal EMTA Power Limited Vs. UoI & Ors (W.P.(C) 5537/2018 & CM Nos. 21583/2018 & 33487/2018) has held as under:- 16. A plain reading of Section 5(1) of the PML Act indicates that an order of provisional attachment can be passed only where the concerned officer has reasons to believe on the basis of material in his possession that: (a) any person is in possession of proceeds of crime; and (b) such proceeds are likely to be concealed, transferred, or dealt with any manner which would result in frustrating any proceedings relating to confiscation of such proceeds of crime. The expression "proceeds of crime" is defined under clause (u) of Section 2 (1) of the PML Act as under: "Section 2 (u) - "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property (or where such property is taken or held outside the country, then the property equivalent in value held....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erial on record to satisfy condition (a). c. No reasons to believe have been or could have been furnished in respect of the invocation of Section 5(1) or the Second proviso thereto, specially keeping in mind the fact that the entire day to day operation of 63MTL is monitored by committee appointed by the NCLT. This Tribunal may call for the file of the Investigation Officer to verify and check there would be no reasons to believe recorded by the Investigating Officer or ED for the invocation of Section 5 at all. 101. Admittedly, all assets & investments, in any event, secured, and all treasury operations of 63 MTL/FTIL are monitored Decision for carrying out the treasury operations which included the switching of the funds from one investment to another were approved by the Committee Appointed by the NCLT comprising - one ex-judge of the Supreme Court and one nominee of the Central Government, both of whom enjoyed veto powers. i. CLB Order dated 30.6.2015 ii. SC Order dated 18.04.2016 (confirming CLB order) iii. NCLT Order dated 16.06.2016 - EgJZ23/CCNCLT Committee approved Treasury operations 102. "63 MTL‟/ FTIL was not an accused; either in the Scheduled ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ommittee, headed by Justice V.C. Daga (Retd. Judge of the Hon‟ble Bombay High Court) to overlook the same. 105. Counsel for '63 MTL' and NSEL alleged that the case of Enforcement Directorate is flawed and it is not that NSEL is a defaulter. The Hon‟ble Bombay High Court where the suits are pending has not given any adverse finding against NSEL or 63 Moons Technologies Ltd. It is submitted by both sets of appellants that the conditions of Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA) for attachment, whether provisional or final to the assets of 63 Moons Technologies Ltd. is not possible. It is argued that the attachment is completely outside the preview of Section 5 of PMLA, 2002 and, therefore, the attachment must be released so that 63 Moons Technologies Ltd., who has 63,000 shareholders with an independent board of directors must not suffer. 106. It is stated by them that merely the fact that 63 Moons Technologies Ltd. holds 99.99% shareholding in NSEL cannot be a ground to attach the assets of 63 Moons Technologies Ltd. Para 59.3 and para 59.5 of judgement of the Hon‟ble Supreme Court in Civil Appeal no. 4476 of 2019 dated 30th April, 201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in essential public interest." xxx xxx xxx "7.2.8. The FTIL has questioned the jurisdiction of the Central Government to decide on the question of fraud and claimed that it has to be proved beyond reasonable doubt by adducing necessary particulars; the Central Government is invoking section 396 of the Act in essential public interest for the merger of NSEL, which is an almost wholly-owned subsidiary of FTIL. The merger is not an adjudication on the alleged fraud. The merger is targeted to achieve its stated objectives for long term sustainability in the best interest of the stakeholders." (emphasis in original) It will be noticed that the objection raised in paragraph 7.2.1 is that Section 396 can be used in the case of Government companies alone, whereas the answer given is that this cannot be so, given the business realities of the case and the FMC order of 17.12.2013 "which throw ample light to the grave shattering of public confidence and the purpose of establishing Commodity Exchange has been defeated". First and foremost, what is important to notice is that the "business realities" of the case are what is contained in "the recommendations of the FMC". We have seen that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....son, by itself, is the protection of the private interest of a group of investors/traders, as distinct from public interest." "59.5. So far, we have gone by the Central Government order as it stands. The Bombay High Court, in stating reasons (a), (b), and (c) as grounds of public interest, has gone much further than even the answer given to the objections that are contained in the order itself. "Restoring/safeguarding public confidence in forward contracts and exchanges, which are an integral and essential part of the Indian economy and financial system, by consolidating the businesses of NSEL and FTIL," is not contained in the answer given to objections in the order. First and foremost, restoring public confidence is no part of the order. What is mentioned is only the fact that public confidence has been shattered, as is reflected by the FMC order dated 17.12.2013. Secondly, the entire expression, "which are an integral and essential part of Indian economy and financial system, by consolidating the businesses of NSEL and FTIL" is no part even of this answer given, but a gloss given by the High Court itself relatable to this answer. 109 Similarly, when it comes to reason (b), "g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Vide order dated 27.06.2018, NCLAT has stayed the order dated 04.06.2018 and continued the aforesaid interim arrangement. 109. Admittedly, as of today, two interim orders passed by the CLB as well as EOW which are continuing and have not been vacated. As far as the judgement referred by Mr. Awasthi in the case of Axis Bank (supra) is concerned, the said judgement does not help the case of the respondent as admittedly, under the scheme of Section 5(1) of the Act, which mandates that the property involved in the money laundering are also to be attached if any person is in possession of proceed of crime. No doubt, if the proceed of crime is parked with the '63 MTL' or in the possession of '63 MTL' , then said judgement will help the case of the respondent. However, in the present case, as per the investigation as well as the judgement referred by the Hon‟ble Bombay High Court, the amount of Rs. 84 crores which is the license fee, has been deposited by the '63 MTL' , as per the direction of the Court. 110. We have requested Mr. Awasthi many times that in case any other amount has been diverted by the National Spot Exchange Ltd.(NSEL) to the '63 MTL' , the respondent would be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....NSEL as we feel that it is a matter of trial. Since the matter is under investigation, whatever money has been transferred to '63 MTL' , has already been deposited as per the directions of High Court. In case, during the investigation, it is found that more money has been parked or transferred, the same may also be attached at the end of '63 MTL'. Thus, the balance has to be strike at this stage in order to secure the amount. 115. There is also no finding by the adjudicating authority that on the basis of investigation, any other amount has been transferred by NSEL to '63 MTL' or any evidence is available in this regard. Once the two authorities i.e. CLB as well as EOW have already restrained the '63 MTL' , '63 MTL' not to sell or alienate or to create any third party right in assets and interest, the attaching of huge money with the said knowledge by the ED amounts to civil death of the company as well as the '63 MTL' 58,000 shareholders with an independent Board of Directors who will suffer without their fault. Not only that, the employees of the Company will also lose their job in case the Company will not be allowed to continue its business if the attachment will continue. It....