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 áffaire 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-to-day 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.