Mumbai: The Enforcement Directorate (ED), the agency which looks into foreign exchange violations and money laundering, on Monday registered a case against the National Spot Exchange Ltd (NSEL), its promoters including Jignesh Shah, and directors under the Prevention of Money Laundering Act (PMLA).
Under PMLA, the ED can probe the spot exchange, along with other related parties mentioned in the First Information Report (FIR), for alleged money laundering and siphoning off funds abroad.
PMLA allows law enforcement authorities to seize property involved in money laundering.
The ED’s move follow the arrests of Jai Bahukhandi, former assistant vice-president of warehousing at NSEL, and Amit Mukherjee, the spot exchange’s former assistant vice-president of business development, last week by the Economic Offences Wing (EOW) of Mumbai Police on charges of bribery in connection with the Rs.5,600 crore payment crisis at the exchange.
Directors of Mohan India Pvt. Ltd, one of the defaulting companies involved in the payments crisis, were also questioned by EOW last week. Mohan India and its affiliate Tavishi Enterprises Pvt. Ltd together owe the exchange around Rs.900 crore.
Last week, Mint had reported that the ED has asked EOW to share the details of the ongoing investigation.
Separately, Financial Technologies (India) Ltd (FTIL), which owns 99.99% of NSEL, said in a clarification to the Bombay Stock Exchange on Monday that after the summons issued to some of the directors of the company, they had appeared and are appearing before the EOW in connection with the payment crisis at NSEL. FTIL is controlled by Jignesh Shah, chairman and managing director.
Investors have called for action against NSEL, its directors and promoters to recover their money.
“We have tried to talk to borrowers and Jignesh Shah (promoter of FTIL), but nothing has come out it,” said Harsh Dalmia, an investor in NSEL. “So, we have no option but to resort to police and agency actions. I am hopeful that they will fast track the entire matter.”
The settlement crisis at NSEL surfaced on 31 July, when the exchange abruptly suspended trading in all but its e-series contracts (these were suspended a week later). The closure may have been prompted by an instruction from the regulator Forward Markets Commission to the exchange asking it not to offer futures contracts, which a spot exchange is not supposed to, but NSEL was.
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.
All trading on NSEL, it later emerged, happened in paired contracts, with investors, through brokers, buying a spot contract and selling a futures one for the same commodity. They pocketed the difference—around 18%. The entities selling on spot and buying futures were planters or processors and members of the exchange.
On 14 August, NSEL proposed a payout plan, but it has been unable to stick to the schedule or even make one complete payout till date.
FTIL shares gained 1.2% to close at Rs.168.80 on Monday on BSE while the benchmark Sensex gained 0.38% to close at 20,607.54 points.