Facing the heat in the National Spot Exchange scam after the arrest last Wednesday of its director CP Krishnan, Geofin Comtrade (formerly Geojit Comtrade) has questioned the role of public sector companies in the entire episode.

“…it is unclear as to what stand has been taken regarding PSUs, who were also members of NSEL. In fact, their participation in NSEL had instilled confidence in several others to participate,” said the broking firm, in a release.

Krishnan was arrested by the Economic Offences Wing of the Mumbai Police.  

State-owned units Metals and Minerals Trading Corporation of India and Project and Equipment Corporation traded on the exchange and are fighting a legal battle to recover their dues.

Question others as well

Geofin Comtrade also questioned the responsibility of the ministry concerned, the designated agency, banks and depositories, as well as State value-added tax authorities and income-tax officials, who accepted NSEL contract notes as supporting documents when investors filed their tax returns over the years.

The company said that the EOW had asked about the knowledge of legitimacy of the NSEL’s operations. “This, we feel, is a question that should be raised to every single member who has transacted at NSEL and not just those members whose clients have outstanding receivables from NSEL,” it said.

Addressing the media on March 4, Rajvardhan Sinha, Additional Commissioner of Police, said the EOW had found fictitious transactions showing the sale of a commodity to a defaulting counter-party and book adjustments of money, which raise suspicions over illegal gratification for promoting certain borrowers.

It also stumbled upon large-scale market capturing practices by unique client code modifications at a single point — the brokers’ end — and the use of certain clients’ accounts to trade without their knowledge.

Geofin Comtrade, according to the EOW, had a trading volume of ₹5,526 crore in the exchange and 1,000 clients.

The broking firm, however, termed the arrest of its official as an extreme step, and said it was unfair to allege that it has not been cooperative, especially as it had obliged investigators even when given oral intimations. The company said it has voluntarily submitted documents and was one of the first complainants to the EOW in the matter.

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