The Bombay High Court today refused to stay the April 21 circular of the Multi Commodity Exchange of India (MCX), which fixed a negative settlement price on the April crude oil contract.

The petitioner, Motilal Oswal Financial Services Ltd (MOFSL), had filed a suit against MCX and markets regulator Sebi, seeking a stay on the processing of the circular which fixed (minus) Rs 2,884 a barrel as the price of crude oil.

Hearing the case today, the court granted four weeks to MCX and Sebi to file their responses.

In yet another case on the same issue, the Delhi High Court refused to grant interim relief to the petitioner, Akshaya Aluminium Alloy Ltd.

MCX on April 21 had fixed (minus) Rs 2,884 per barrel as the negative settlement price of crude oil futures, for which a cumulative amount of Rs 242 crore was distributed among traders with buy positions.

Crude oil being a cash-settled contract and trading being allowed only till 5PM, traders failed to square off their position when its benchmark contract, West Texas Intermediate (WTI) on the Nymex started moving in negative territory and settled the same day at -$37 a barrel by around 11PM Indian standard time.

Sebi had curtailed the trading time to 5PM in the wake of the coronavirus spread from 11.30PM earlier. The closing time has now been restored to 11.30PM.

Since the sellers did not get opportunity to square off their positions, they incurred massive losses for a mistake they never committed. Many brokers, including Motilal Oswal Financial Services, Religare Broking and Kunvarji Commodities, moved court pleading a stay on the April 21 MCX circular.

The petitioners argued that the contract note does not mention negative pricing and hence, negative price fixation, that is, due date rate or DDR cannot be negative.