The National Spot Exchange of India is again in the news for all the wrong reasons. Due to a delay in filing of an appeal in a case, the exchange stands to lose ₹633 crore. The Supreme Court of India has described the delay as “uncondonable”.
NSEL was in the news eight years ago for what was said to be an “employee fraud” involving ₹5,600 crore, in which derivative contracts were allowed on commodities that did not exist. The exchange was promoted by Financial Technologies India, (promoted by Jignesh Shah, the owner of 63 Moons), and the National Agricultural Co-operative Marketing Federation of India (NAFED), a farmers’ co-operative.
And now, NSEL lost a case in the Supreme Court narrowly, on a technical point — it did not file an appeal within the allowed time.
The facts of the case are as follows:
A company called Dunar Foods, (which is shown to be a ‘sister concern’ of another company called PD Agro) defaulted on an SBI loan; the bank took Dunar Foods (‘corporate debtor’) to the insolvency court, NCLT, where an Interim Resolution Professional was appointed. Dunar Foods had hypothecated commodities kept in a warehouse run by NSEL.
Earlier, in another case involving PD Agro, NSEL had obtained an order from the High Court of Bombay, for the recovery of ₹633 crore from PD Agro. The order also restrained PD Agro from disposing off its commodities kept with NSEL. It is NSEL’s case that PD Agro and Dunar Foods are sister concerns, with same or related promoters, and that PD Agro had “siphoned off” ₹744 crore, in favor of Dunar Foods.
As such, NSEL wanted the Interim Resolution Professional appointed in the case between SBI and Dunar Foods to include its own claim on Dunar Food’s commodities—which, it believes to be actually PD Agro’s. But the IRP said that there was no contract between NSEL and Dunar Foods, so it could not entertain NSEL’s claim. Later, the National Company Law Tribunal agreed with the stand taken by the IRP.
It is at this point that NSEL appears to have slipped. It delayed going on appeal to the NCLAT against the NCLT’s decision. It did go on appeal, but well after the stipulated time of 30 days and beyond the 15 days grace period that the NCLAT was empowered to give. So, it had 45 days' time, but it went on appeal much later, pleading for condoning of the delay.
NCLAT said it would not condone the delay; in fact, it was not empowered to condone any delay beyond 15 days after the first 30 days allowed for appeal.
Aggrieved, NSEL took the case to the Supreme Court of India.
Apex court’s observations
The apex court noted that NSEL hadn’t even asked for a certified copy of NCLT’s judgment within the 30 days, leave alone, going for an appeal against it.
Terming the delay “uncondonable”, Judges MR Shah and Aniruddha Bose of the Supreme Court said they would not interfere with NCLAT’s decision, saying that indeed NCLAT was right in rejecting the appeal because it did not have any right to condone any delay beyond 15 days.
NSEL’s advocate, Manindar Singh, pled for condoning the delay in view of the huge sum involved; he wanted the Supreme Court to invoke its powers under Article 142 of the Constitution of India, which says that the apex court may pass an order as necessary for doing “complete justice” in any case.
The judges disagreed, citing a precedent. In a 2004 judgment in the case of Teri Oat Estates vs UT Chandigarh, in which the judges of that case had upheld law over sentiment, they had said: “We have no doubt in our minds that sympathy or sentiment by itself cannot be a ground for passing an order in relation whereto the appellants miserably fail to establish a legal right.”
(NSEL did not respond to BusinessLine's queries. The story will be updated if a response is received.)