The committee is likely to have powers to pass a decree against the borrowers who have defaulted in the NSEL case
Mumbai: The Bombay high court on Wednesday said it will set up a three-member committee to recover money in the ₹ 5,574.35 crore payment crisis at the National Spot Exchange Ltd (NSEL).
The committee is likely to have powers to pass a decree against the borrowers who have defaulted in the NSEL case.
It will comprise a retired judge, a lawyer and a chartered accountant. A single bench of the high court will decide on the members and the committee’s terms of reference on Friday.
This move means the borrowers of NSEL will be bound to appear before the committee and the decree of the committee will be binding on them.
Market participants said this was a positive move.
“It is a very good and positive step towards recovery, and it will put pressure on other defaulting borrowers to come and pay up their dues," said Ashok Mittal, alternate president of Commodity Participants Association of India.
The investors felt the development was delayed, but hoped for faster recovery of their dues.
“Considerable time has lapsed in forming the committee. We hope this committee will move and act better than that formed by FTIL," said Ketan Shah, an aggrieved investor in NSEL.
The suit seeks to recover ₹ 5,000 crore at an annual interest of 16%.
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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