NSEL files case against 5 defaulters

M. R. SUBRAMANI
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Govt mulls criminal proceedings against bourses officials

CHENNAI, AUG. 26: Faced with the prospect of another payment default, the National Spot Exchange Ltd (NSEL) has filed a case with the Maharashtra police against five of the nine defaulters. We have filed a case with the Economic Offences Wing of Maharashtra police as the defaulters, despite repeated pleas, have not paid their dues, said an NSEL official. The NSEL itself could face criminal proceedings with the Union Government mulling action against its officials, including founder Jignesh Shah, on various charges such as of money laundering. The Government will start criminal proceedings against NSEL officials soon, said a Consumer Affairs Ministry official, who did not want to be identified.
SHORT FOR 2ND PAYOUT

Against the Rs 174.72 crore required for the second payment schedule, NSEL received only Rs 8.50 crore till Monday evening. It defaulted the first payment schedule also that went by on August 20. The exchange has filed complaints against ARK Imports Pvt Ltd, Lotus Refineries, N.K. Proteins Ltd, Vimladevi Agrotech Ltd and Yathuri Associates.

The other four defaulters are: Loil Overseas Food, NCS Sugars, Spin Cot Textiles and Tavishi Enterprises. N.K. Proteins is the biggest defaulter owing the exchange Rs 967 crore.
BIGGER SCAM?

An investigation by the Forward Markets Commission (FMC) into the functioning of the NSEL has revealed that the scam could be of a larger scale. It is just not a case of payment or delivery default on NSEL. Money laundering has taken place. Warehouse fraud has been committed and there is no proper accounting of stocks against which guarantee has been given, said the Consumer Affairs Ministry source. The FMC has submitted its findings on the NSEL to the Government, which is set to take action soon against the exchange officials. The Income-Tax Department is conducting searches on NSEL defaulters, and the Ministry of Corporate Affairs is also looking into the issue.
SLEW OF RESIGNATIONS

As L ffaire NSEL got messier, many have been resigning from the bourse. According to agencies, Shankarlal Guru, non-executive Chairman of NSEL, resigned from the board on August 7. Two more non-executive directors, Ramanathan Devarajan and B. Pawar, also quit, leaving Jignesh Shah and Joseph Massey, who heads MCX-SX, also a unit of Financial Technologies, on the board. Guru told PTI that he had nothing to do with the NSEL issue and was not responsible for the day-today functioning or running of the exchange. He, however, said that if his son-in-law, Nilesh Patel, the biggest defaulter on the NSEL, has done anything wrong, action should be taken. The NSEL suspended its operations after the Consumer Affairs Ministry asked it to stop offering forward contracts. It has to settle Rs 5,700 crore to 148 members and brokers who represent 13,000 investors. The exchange has agreed to pay the dues in 30 weeks but those who owe money to it are not paying up even to a staggered schedule. Asked what action would be taken if the NSEL defaulted on the second payment as well, the source said little can be done by the Government as the exchange was not regulated. It is a case of fraud, and criminal proceedings will take care of it, he said. More trouble lies ahead for the NSEL with the Investors Forum planning to file a criminal case against the officials. subramani.ma

HC notices to govt, regulators

Respondents include Sebi, FMC, Ministry of Consumer Affairs, etc
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Jignesh Shah

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TTML, BGR, Sah Petro rise after Sebi lifts curbs MCX zooms 100% from August low RBI widens ambit for bank guarantees to NRIs Relocation of FMC to FinMin likely soon Your wait for new VIX derivatives got longer In its first hearing of a public interest suit on the National Spot Exchange payments mess, filed by the Investor Grievances Forum (IGF), the high court here on Friday asked the respondents to reply before the next hearing, on October 10. The respondents include the Union ministries of consumer affair and finance, NSEL and its director, Jignesh Shah, the Securities and Exchange Board of India (Sebi) and the Forward Markets Commission (FMC). Kirit Somaiya, president of IGF (and a member of the Bharatiya Janata Party), said it seemed the money involved was at least Rs 8,000 crore. NSEL has said total pay-in obligations from its 24 members involved were Rs 5,600 crore. A lot of the money involved in this imbroglio belongs to non-resident Indians (NRIs). Members invested the money of their NRI clients and also ran their own ponzi schemes, involving lots of small clients. A large portion of the money is unaccounted, alleged Somaiya. The PIL says MMTC and PEC incurred losses of Rs 350 crore due to illegal speculative transactions. Four weeks have passed since the issue of NSEL defaults erupted and there have been no complaints from these government-owned companies. This is a big surprise, said Somaiya. IGF says it complained to the Enforcement Directorate (ED) about the NSEL payment default. ED told us they wont act on complaints by private agencies. No government agencies have complained so far, said Somaiya. Sebi, notes IGF, has said NSEL isnt in its jurisdiction, while FMC has said it wants additional power to regulate spot exchanges. So far, NSEL has only filed a complaint against investors under Section 138 of the Negotiable Instruments Act for bouncing of cheques. There are already 1,600,000 cases pending under this Act. With the current speed, this case will come for hearing only after 20 years. Hence, the exchange is just buying time, nothing else, Somaiya added.