Investor consent withdrawal puts NSEL settlement in jeopardy

The NSEL Investor Action Group (NIAG), which withdrew the consent after an emergency meeting on 6 December, accused 63 Moons of violating the foundation of the settlement talks by seeking permission to access ₹300 crore from attached assets without consulting the group.

However, the NSEL Investors Forum (NIF) has claimed that it has secured the support of investors, having approximately 64.5% in value of the outstanding claims, equating to over ₹3,000 crore.   

To achieve a settlement, the consent of investors having more than 75% in value of the outstanding dues is required. A formal vote was scheduled from 11 November to 9 December.

In a statement on 9 December, the group expressed confidence that it will secure the support of the majority. The NIF reported that only 1.71% of investors, representing ₹79.47 crore, have withdrawn their consent, and those withdrawals have already been factored into the tally.

To be sure, 63 Moons had filed an application in the Maharashtra Protection of Interest of Depositors (MPID) court, seeking access to ₹300 crore of attached assets. The request was made to cover operational expenses, with the company offering ₹300 crore worth of securities as collateral.

This move, however, did not sit well with the NIAG, which accused 63 Moons of breaching an agreement to refrain from accessing any assets until the settlement was finalized. The application is scheduled to be heard on 23 December.

“At one point, we had agreed to ₹1,950 crore for the NSEL OTS. However, the NIAG has now withdrawn its endorsement (and most of our members) for this OTS as 63 Moons moved an application in the MPID court,” the NIAG representative Ketan Shah said in response to Mint’s queries.

The NIF statement, however, stated that several investors who initially withdrew their support had reconsidered their position and reaffirmed their consent after gaining a clearer understanding of the finer details regarding 63 Moons’ request. 

“Even after closing the online link on 9 December, investors have been sending emails giving their confirmation to OTS. This consent will be over and above 64.5%. This shows that many of the investors want peace and settlement rather than fight,” the statement reads.

The settlement

After NSEL’s collapse in 2013, approximately ₹5,500 crore was owed to 13,000 investors, leaving many with unresolved claims. Over the years, partial payments were made, but large investors have been waiting for a full settlement.

The OTS proposal, introduced in November 2024, sought to distribute ₹1,950 crore—approximately 42% of the total ₹4,650 crore owed to investors. 

The settlement amount was to be transferred to investors after the requisite majority consent. The NIAG’s withdrawal from the process has cast a shadow on the outcome.

Meanwhile, NSEL said in a 9 December statement that the exchange sought to reassure investors, stressing that the settlement amount of ₹1,950 crore was decided after mutual discussions and that the assets currently attached—estimated at ₹2,500 crore—under the MPID Act were more than sufficient to cover the proposed amount.

The statement further clarified that 63 Moons required ₹25 crore per month to maintain its operations until the completion of the settlement process, a need that had led to the request for access to the attached funds.

The company argued that the attached assets were secure and that the settlement amount would be guaranteed once the required legal processes were followed.

The NIF statement said a formal settlement scheme will be drafted by 15 January 2025 after the final approval, assuring that its legal team would review the draft settlement scheme expeditiously, particularly in terms of safeguarding investor rights, and would revert within 15 days, by 30 January 2025. 

This would allow NSEL and 63 Moons to finalize the settlement scheme and address any concerns about investor rights before filing it in a competent court by 15 February 2025. “This will be the first-of-its-kind settlement in the Indian financial market,” the statement said.

However, despite these reassurances, investor sentiment remains divided. The NIAG’s withdrawal has left the settlement process in a precarious position, as it maintains that no assets will be exchanged without the approval of the court.