As world crude prices plummeted, futures entered negative pricing territory. India brokerage faced the brunt of it. Dhanera Diamonds-Motilal Oswal case fit for arbitration says court
The Bombay High Court has restrained Dhanera Diamonds from alienating or disposing off its assets for six weeks in a petition filed by Motilal Oswal Financial Services to recover its dues from the commodity trader.
The court also allowed the brokerage to pursue its case before an Arbitral Tribunal constituted by Multi Commodity Exchange.
Motilal Oswal had moved court to secure Rs 80.74 crore from Dhanera Diamonds against the settlement obligations for trades in crude oil contracts, mapped to Nymex futures, that ended in the negative on April 20 because of a glut—meaning, sellers had to pay buyers to take the commodity off their hands.
A single-judge bench comprising Justice SC Gupte observed that there is a prima facie case for referring the case for arbitration. As such, the court must grant protection to the brokerage till an Arbitral Tribunal is constituted by the MCX.
The court directed the brokerage to approach the Arbitration Tribunal constituted by MCX within six weeks.
The counsel for Dhanera Diamonds argued that negative price of crude oil futures was “never even heard of”. No claim would arise as the closing price was determined on the basis of Nymex future prices after the closing hours of commodity trading in India. Therefore, the brokerage must make a claim against the commodity exchange, Dhanera Diamonds argued.
These arguments must be made before the Arbitral Tribunal that will go into the merits of the case, the high court said in its order.
India Legal Bureau