In a significant development, the Bombay High Court has dismissed over 20 petitions challenging Multi Commodity Exchange (MCX) decision to settle its crude oil contract in the negative during the Covid pandemic.
The exchange settled its April 2020 crude oil futures contracts at a negative due date rate of minus ₹2,884 per barrel following the historic collapse in global oil prices during the pandemic.
The bench of Justices RI Chagla and Advait M Sethna upheld the circular of MCX issued on April 21, 2020, ruling that the exchange acted in accordance with contract specifications that linked settlement to the benchmark NYMEX crude oil contract.
The dispute arose after the NYMEX May 2020 crude oil contract settled at an unprecedented negative $37.63 per barrel on April 20, 2020, amid a collapse in demand and storage shortages during pandemic-related lockdowns.
Since MCX’s contract specifications linked the due date rate to the NYMEX settlement price, the MCX crude contract also settled at a negative value.
A group of petitioners including Dhanera Diamonds, sought annulment of trades or settlement at ₹1 per barrel.
According to the petitioners, a price in law necessarily means consideration paid by a buyer to a seller and therefore cannot be negative. The petitioners said that MCX and SEBI should have exercised emergency powers to annul trades or settle contracts at ₹1 per barrel, given the unprecedented market conditions. Due to the extraordinary anomaly, 10 brokers made overnight profits of ₹215 crore, which is the loss suffered by the petitioners, they argued.
SEBI said MCX crude oil futures were cash-settled derivative contracts governed by a special statutory framework, rather than ordinary contracts for the sale of goods.
It said that negative prices were not unprecedented globally and had occurred in energy, electricity, and interest-rate markets during periods of severe supply-demand imbalance.
The regulator also opposed demands for compensation from the Investor Protection and Education Fund, arguing that traders had voluntarily taken speculative positions and suffered losses because of market movements.
In his judgment Justice Chagla said petitioners had consciously agreed to be bound by the prices on the NYMEX and the fact that the Petitioners consciously chose to hold the contract till the settlement date of 20th April 2020.
Since the petitioners had not challenged the underlying regulations and bye-laws, they could not seek to undo completed settlements, he said.
Chagla said, “We accordingly find no merit in these Petitions which seek to quash the impugned circular and effectively undo the settlement of crude oil future contracts which is impermissible in law and which would run contrary to the very contract specifications which the petitioners are bound under. Accordingly, the Writ Petitions are dismissed with no orders as to costs.“
Published on June 25, 2026
