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Home / Companies / News /  NSEL executive arrested as Jignesh Shah, Joseph Massey quit MCX-SX posts

Mumbai: The economic offences wing (EOW) of the Mumbai police on Wednesday arrested Amit Mukherjee, former assistant vice-president, business development at National Spot Exchange Ltd (NSEL), the first such arrest in the case.

He has been arrested on bribery charges, said an EOW official who did not want to be identified.

Anjani Sinha, ex-managing director and CEO of NSEL, who has also been summoned by EOW, said in a 11 September affidavit that he along with Mukherjee and four other top officials of the spot exchange were “responsible for the current problems faced by NSEL".

The other four officials include Jai Bahukhandi, Shashidharan Kotian, H.B. Mohanti and Santosh Mansingh.

“It is likely that more arrests will follow in the next few days," the EOW official said.

On Wednesday, the EOW also questioned the directors of Mohan India Pvt. Ltd, one of the 24 defaulting companies involved in NSEL’s 5,600 crore settlement crisis. Mohan India owes about 575.08 crore in payout obligations to NSEL investors.

Sinha’s affidavit said that the department headed by Mukherjee introduced all the 24 defaulting companies to NSEL. Mukherjee himself introduced companies such as N.K. Proteins Ltd, Swastik Overseas Corp., Mohan India and NCS Sugars Ltd, it added.

N.K. Proteins owes 967.15 crore to NSEL investors, Swastik Overseas owes 94.6 crore and NCS Sugars 58.85 crore.

The affidavit has accused Mukherjee and his team of “introducing buyers with bad credentials into NSEL system, not informing the management about possible diversion of funds by the buyers and not informing the management about non-availability of stock or pledge of stock with other lenders allowing them to siphon off funds".

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 may have been prompted by an instruction from the Forward Markets Commission (FMC) to the exchange asking it not to offer futures contracts, which a spot exchange isn’t 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. 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 or even make one complete payout.

Sinha’s affidavit accused Mukherjee and Bahukhandi of “manipulating facts" and said both the officials of the spot exchange “were compromised and so, their inputs were devoid of facts".

On 1 October, the EOW searched at least 52 cities across India, including the Mumbai homes of Jignesh Shah, chairman and managing director of Financial Technologies (India) Ltd (FTIL), and Joseph Massey, chief executive officer and managing director of MCX Stock Exchange Ltd (MCX-SX), in connection with the payments crisis at NSEL. FTIL is the promoter of NSEL and MCX-SX.

On 1 October, the police filed a first information report (FIR) naming all the directors of NSEL, including Shah and Massey. The FIR includes the names of the 24 members who owe money to about 13,000 NSEL investors.

Jignesh Shah and Joseph Massey have resigned from the board and respective posts from MCX-SX, the exchange said in a press release late on Tuesday. Shah was the vice-chairman of the exchange, while Massey was the managing director and CEO.

Former managing director of Life Insurance Corp. of India Thomas Mathew T. was nominated as public interest director with effect from 8 October.

In an interim arrangement, U. Venkataraman, whole-time director, MCX-SX, will assist a special committee of public interest directors in carrying out the functions of the exchange.

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