Motilal Oswal Moves Bombay High Court Seeking Dues From Dhanera Diamonds

Brokerage Motilal Oswal Financial Services Ltd. has moved the Bombay High Court to secure a sum of Rs 80.74 crore due from Dhanera Diamonds against the settlement obligations for trades in crude oil contracts that expired on April 20.

The financial services firm has filed a petition under section 9 of the Arbitration and Conciliation Act, 1996, which allows a party to seek interim directions from a court for securing any disputed amount during pendency of proceedings before an arbitrator.

On April 21, India's two commodity exchanges—MCX and Multi Commodity Exchange Corporation—had issued a settlement circular assigning a negative due date rate of Rs 2,884 for settlement of crude oil contracts which are mapped to the New York Mercantile Exchange's futures. That was due to the unprecedented fall in global crude oil prices.

Motilal Oswal has claimed in its petition before the arbitrator that Dhanera Diamonds executed trades in crude oil futures expiring on April 21. As the crude oil prices turned negative, the debit balance in the account exceeded the margins obtained by the brokerage from the diamond trading firm.

And so, the MCX deducted the required payouts towards settlement of the negative prices from the brokerage's account. A dispute arose when Dhanera Diamonds refused to settle its liability towards the brokerage firm for the the outstanding dues prompting the broker to initiate arbitration proceedings and seek interim relief from the High Court.

A bench comprising Justice Riyaz Iqbal Chagla has posted the matter for hearing on May 15 after observing that the brokers have also challenged the validity of the settlement circulars issued by the exchanges. No stay on the circular has been granted by the high court.

Dhanera Diamond's counsel argued that the broker had not disclosed certain key documents during the arbitration proceedings.

Senior counsels Birendra Saraf and Ravichandra Hegde argued on behalf of Motilal Oswal while Venkatesh Dhond argued on behalf of Dhanera Diamonds.