Mumbai: The Economic Offences Wing (EOW) of Mumbai police on Monday said it was probing the books of accounts of Jignesh Shah-led Financial Technologies (India) Ltd, or FTIL, in connection with the Rs.5,574.35 crore payment crisis at the National Spot Exchange Ltd (NSEL).
FTIL holds a 99.99% stake in NSEL. “We are looking into the books of FTIL since its inception,” said Rajvardhan Sinha, additional commissioner of EOW.
The investigative agency has also obtained the mobile tower locations of the board of directors of NSEL since 2011 to prove that most directors had signed the minutes of NSEL board meetings despite having been absent from these meetings.
Meanwhile, a Mumbai court on Monday directed the EOW to oversee the settlement plan of Mohan India Pvt. Ltd, one of the biggest defaulters of NSEL. Mohan India has agreed to repay Rs.771 crore to NSEL.
The court has asked the firm to repay the money in a year. It also directed Mohan India to sell its properties to repay NSEL.
“EOW shall move court for further order in case the transactions (sale of property by Mohan India) are fishy and not bona fide and not projecting proper value of the property,” the court order said.
The court asked Mohan India to make “periodical report of the developments (repayment) made in each month before the third day of succeeding month to the court and the EOW”.
In a related development, MMTC Ltd, which has moved the Bombay high court against NSEL to recover Rs.228 crore, said that Anjani Sinha, former chief executive officer and managing director of NSEL, was not the only person liable for the payment crisis at the commodity spot exchange. Sinha is currently under judicial custody. On Monday, Darius Khambata, senior counsel for MMTC, said in the court that the quarterly reports of NSEL were submitted directly to the board of FTIL and these submissions show that Jignesh Shah and FTIL were aware of fraud at NSEL.
MMTC has alleged that FTIL and Shah are trying to hide behind a corporate veil.
“Jignesh Shah cannot plead ignorance. NSEL has made false submissions about the settlement guarantee fund. It also gave false assurances about existence of goods worth Rs.5,000 crore,” said Khambata.
The settlement crisis at NSEL came to light on 31 July when the exchange abruptly suspended trading in all but its e-series contracts. These, too, were suspended a week later. The closure of trading may have been prompted by an instruction from the ministry of consumer affairs to the exchange asking it not to offer futures contracts.
A spot exchange isn’t supposed to do so, but NSEL was doing that.
NSEL tried to implement the change but because its appeal was to investors and members who were not interested in spot trades, it eventually had to suspend all trading. It later emerged that all trading on NSEL happened in paired contracts, with investors, through brokers, buying a spot contract and selling a futures one for the same commodity.
The entities selling on spot and buying futures were planters or processors and members of the exchange. It turned out there were only 24 of them, and they used the paired contracts as a way to raise easy money. When the trading was suspended, the investors were left holding contracts that the members couldn’t buy because they didn’t have the money to do so.
On 14 August, NSEL proposed a payout plan, but it has been unable to stick to the schedule and has not made a single successful payout ever since.