NSEL case: Lotus Refineries director Arun Kumar Sharma granted bail1 min read . Updated: 07 Feb 2014, 06:18 PM IST
Sharma was arrested on 11 Novemberthe fifth arrest in connection with the payment crisis at the NSEL
Mumbai: A Mumbai court on Friday granted bail to Arun Kumar Sharma, director of Lotus Refineries Pvt. Ltd, one of the borrowers in the ₹ 5,574.35 crore payment crisis at the National Spot Exchange Ltd (NSEL).
Sharma was arrested on 11 November—the fifth arrest in connection with the payment crisis at the NSEL, promoted by Financial Technologies (India) Ltd (FTIL).
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 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.
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. 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.