India Infoline Commodities has served a ₹500-crore defamation notice against the National Spot Exchange Ltd (NSEL) and its Joint Managing Director Prakash Chaturvedi for reporting details on the arrest of its director with all regulators.
The exchange had asked banking, insurance and capital markets regulators—Reserve Bank of India, Insurance Regulatory and Development Authority and Securities and Exchange Board of India, respectively—to ascertain the ‘fit and proper’ criteria of IIFL’s businesses after a director was arrested.
The payment crisis came to light in July 2013 after the government ordered the Jignesh Shah-promoted spot exchange to stop trading in some instruments. Following this, the exchange was forced to suspend trading and eventually down shutters.
No response to the notice Prasanth Prabhakaran, President, Retail (Broking), IIFL, told BusinessLine that the exchange mischievously attached the remand notice and asked the regulators to ascertain the ‘fit and proper’ criteria of the group businesses. The defamation notice was served on March 26 with the option to respond within 15 working days, NSEL has not responded till date.
“We will go ahead with the defamation suit. When the exchange itself is in neck-deep trouble and its promoter was declared not ‘fit and proper’ by all the regulators, what rights do they have to send our details to different regulators. This has adversely impacted our various businesses, including insurance and NBFC (non-banking finance company), which were built painstakingly over 20 years,” he said.
Prakash Chaturvedi, Joint Managing Director, NSEL, however, said the defamation suit is a “preposterous and ludicrous attempt to browbeat and pressurise the exchange officials not to speak on the brokers’ part in the payment settlement failure and scuttle the ₹1,000-crore settlement offered by FTIL (Financial Technologies India Ltd).
Settlement plan Last month, FTIL submitted to the government a ₹1,000-crore settlement plan to clear the claims of small and mid-sized investors on NSEL.
“It is the responsibility of the exchange to report an action taken against its member to the regulator. We cited and referred only the material which was available in public domain,” Chaturvedi said. “It is part of my duty to work in the interest of investors and since the settlement is favouring them, I was trying to get their support,” he added.
Dubbing the settlement offer as ridiculous, IIFL’s Prabhakaran, however, said the exchange has failed completely in ensuring that the commodities bought over by the investors are stored in the warehouse. Now, how the exchange can ask the brokers to chip in with money for its failure, he asked.