Mumbai: The Forward Markets Commission (FMC) on Thursday banned group entities and associate concerns of the National Spot Exchange Ltd (NSEL) and its parent Financial Technologies (India) Ltd (FTIL) from participating in auctions of commodities and assets.
Board members and employees of both the companies have also been barred from the auctions. The letter addressed to NSEL chief executive officer and managing director, Saji Cherian, referred to the recent auction of castor seeds and sugar conducted by the spot exchange. It said the regulator had received a complaint that some companies related to ex-managing director and CEO of NSEL Anjani Sinha have also participated in the auction.
FTIL, promoted by Jignesh Shah, owns 99.99% of NSEL.
“This raises a serious concern on the auction-cum-bidding process carried out by NSEL,” the letter signed by FMC deputy director V.V.B. Raju said. On Saturday, Mint reported that Agri Vistas Pvt. Ltd—co-founded by Sinha—bid for some of the stock auctioned by the exchange in September. Agri Vistas was one of the bidders for NSEL’s castor seed stock auctioned on 2 September. The firm that won the auction, Abans Commodities (I) Pvt. Ltd, is owned entirely by Abhishek Bansal and related parties. Bansal partnered with Sinha to set up Agri Vistas and owned a 50% stake. Sinha and Bansal submitted their resignations from the board of Agri Vistas in early July, just before the NSEL crisis erupted. Abans Commodities successfully bid for 1,708.72 tonnes of castor seeds for Rs.5.6 crore.
FMC ordered that all such auctions shall be overseen by a committee, comprising five members—one representative each from the Commodity Participants Associations of India (CPAI), Association of National Exchanges Members of India (ANMI), BSE Brokers’ Forum and two representatives of NSEL Investors Forum.
“This is a good and welcome move by FMC,” said Ashok Mittal, the alternate president of CPAI, adding it will bring in more transparency and trust in the whole auction mechanism. “Also now, the other parties in the commodities business will be able to participate in the process. The price which will be realized, will be realistic and better price,” Mittal added. FMC on Thursday also prescribed certain guidelines for disposal of commodities and assets by NSEL.
In a related development, the Bombay high court on Thursday asked FMC to submit a statement on its plans regarding the settlement of e-series gold and silver contracts of the National Spot Exchange Ltd. An order is expected on Friday.
NSEL was supposed to start financial settlement of the e-series gold and silver contracts on Thursday.
NSEL, which suspended trading in most contracts on 31 July, is being investigated by several government agencies. On Tuesday, Mumbai police’s economic offences wing froze bank accounts of NSEL and Sinha, a day after they conducted searches at more than 50 locations in connection with the Rs.5,600 crore payments crisis at the exchange.
Police searched the Mumbai residences of Shah, chairman and managing director of FTIL, and Joseph Massey, chief executive officer and managing director of MCX Stock Exchange Ltd, and another entity promoted by Shah on Monday, and also raided the residence of Sinha.
Separately, FTIL’s associate firm National Bulk Handling Corp. Ltd on Thursday said the economic offences wing has seized the stocks of NSEL and its subsidiary IBMA after an investigation on Monday and Tuesday.
Khushboo Narayan contributed to this story.