"NSEL board violated multiple regulations, breached provisions of Companies Act and failed to act against defaulters," the report said.
What is interesting in this report is the effect of the Rs.5,400-crore NSEL payout crisis on the Indian economy.
Exclusive copy of RoC interim report is with Headlines Today/Aajtak and it shows how the scam tarnished Brand India and gave a bad signal to foreign institutional investors (FIIs).
In the section of "adverse effects on economy", RoC has said:
-- Around 13,000 investors have lost their hard-earned money.
-- Brand India tarnished -- bad signal to FIIs.
-- Huge impact of NSEL scam on FTIL and MCX - the other two entities promoted by Jignesh Shah.
-- NSEL business stands still and paralysed - great impact on revenue/profitability of FTIL.
-- Loss to government i.e. income tax, service tax and VAT
-- Question of past/current employees' security and their families' mental agony.
-- In FTIL and MCX, shareholders also lost heavily due to nose-diving share prices after NSEL crisis.
The NSEL crisis has hit investors so hard that today, despite good flow of money in the Indian stock market, no retail investors is seen on Dalal Street.
"Investors, whose money has been lost or whose money is stuck in the scam, are the same individuals who used to invest in the stock market. Now, they don't have any money or confidence to invest in any other exchange and its schemes. Whatever money is flowing into the Indian stock market belongs to FIIs, who still believe in the India story," says Alok Churiwala, vice-chairman, BSE Brokers Forum.
"This Diwali, sentiment on Dalal Street was not so pleasant. It was like Sensex touching high without retail investors, thanks to NSEL," he said.
The RoC has concluded that the crisis-ridden NSEL breached as many as 15 provisions of the Companies Act, including those related to corporate governance.
Some instances are: section 297, section 295, section 227, section 292, section 292A, section 299, section 301, section 341, section 214, section 256, section 224, section 217 (on many counts), section 166/220/159, section 187 (C) and schedule VI r/w Section 211 of the Act and Accounting Standards r/w 211 (3A).
In RoC's interim report, there have been discrepancies in the minutes of the board meetings and it was found that the board did not discuss the exchange's compliance with various rules such as those related to admission of new members.
Report ends with this conclusion:
-- Board of directors not acted in good faith and failed in performing their fiduciary duties towards shareholders.
-- Business of the company was not carried as per the prudent commercial practices/public interest.
-- Board of directors never bothered about the functioning of the exchange.
-- Corporate governance failure - utter lack of transparency, integrity, competence, compliance with laws, and ethics.
-- Many directors such as Jignesh Shah, Josephy Massey and Sreekant Javalgekar are holding common directorship in all FT group companies. They cannot take shelter for ignorance about state of affairs of the company.
In the end, RoC recommends this to the Corporate Affairs Ministry: "Ministry may seek appropriate relief under section 397/398, r/w 401, 402 and 408 of the Act to protect the interest of public at large and persons dealing with the NSEL."
Till now, no action has been taken by central ministries against NSEL or its directors.
Even the Economic Offence Wing (EOW) of Mumbai Police who has been quite aggressive against NSEL officials and defaulters (accused in NSEL scam) have been delaying the decision to attach the properties of Jignesh Shah, Josephy Massey and few others -- the main accused and masterminds behind the NSEL scam.
Surprisingly, the Forward Markets Commission (FMC) whose officials played a hand-in-glove role in NSEL irregularities since the last two years seems to be least bothered to take any action on "fit and proper" issue in NSEL case, citing some legal reasons.
Virendrasingh Ghunawat Mumbai, December 2, 2013 | firstname.lastname@example.org | UPDATED 16:04 IST