NSEL assets may be liquidated to pay investors
Mumbai: National Spot Exchange Ltd (NSEL) and suspects in the Rs.5,574.35
crore settlement crisis at the commodities bourse risk their assets
being liquidated to help pay investors their dues before the police
presses charges in the case.
“Normally liquidation of assets is done only after a chargesheet is filed,” Himanshu Roy,
joint commissioner at the economic offences wing (EOW) of Mumbai
police, said on Wednesday. “However, this is a stand-alone case
involving a large number of investors who have pressing needs, so we are
considering liquidation.”
Investors may be returned their dues on a proportionate basis after the proposed asset liquidation.
“Till now, we have only received only 4% of the total money invested in NSEL,” said Ketan Shah,
an investor of NSEL. “It will be a huge relief for investors if EOW
decides to liquidate the attached assets and get us at least 25% of our
investment back.”
The statement by the EOW official came a day after the investigating agency seized the assets of Jignesh Shah, chairman and managing director of Financial Technologies (India) Ltd (FTIL), and directors on the board of NSEL, which is 99.99% owned by FTIL.
The others included Joseph Massey, former chief executive officer of MCX Stock Exchange Ltd (MCX-SX); Shreekant Javalgekar, former chief executive officer and managing director of Multi Commodity Exchange of India Ltd (MCX); and Shankarlal Guru, former chairman of NSEL.
The EOW said it seized 119,000 shares in FTIL owned by Shah worth Rs.1.78 crore, two flats including one in Juhu in the western suburbs of Mumbai, a plot of land worth Rs.1.6 crore in Pune, and fixed deposits worth Rs.11.75 crore
So far, EOW has attached at least 206 properties of defaulting borrowers of NSEL worth Rs.2,579 crore. The agency has recovered at least Rs.170.97 crore from 322 bank accounts that have been frozen in connection with the NSEL crisis.
“We are determined to take this case to its logical
conclusion and in the coming days you will see more arrest in connection
with the NSEL crisis,” said EOW’s Roy.
Investors affected by the NSEL crisis met Roy on
Wednesday and asked him to take action against Javalgekar. In a note to
Roy, the investors claimed that Javalgekar as the financial controller
in all the three companies—MCX, FTIL and NSEL, must have been aware of
the situation from the time it unfolded.
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.
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