Home / Market / Stock-market-news /  Two years on, NSEL investors seek to retrieve lost funds

Nearly two years after a 5,574 crore fraud at the National Spot Exchange Ltd (NSEL) brought the exchange empire of entrepreneur Jignesh Shah to its knees, investors who lost money in the scam are fighting on. Lawsuits and investigations don’t concern them. Their only aim: retrieving their money.

The economic offences wing (EOW) of Mumbai Police, which is investigating the NSEL scam, has attached assets worth nearly 6,000 crore and arrested 24 suspects including NSEL officials, directors, defaulters and brokers. However, none of the assets have been sold yet, meaning no relief for those who lost money. Now, investors who have banded together under the NSEL Aggrieved and Recovery Association (NAARA) are pressing authorities to liquidate these assets.

“Action is taking shape now," said Bharatiya Janata Party member of Parliament Kirit Somaiya, who met Maharashtra chief minister Devendra Fadnavis with a team of NAARA representatives on 9 June. “We had a series of meetings with the CM that was also attended by top bureaucrats and representatives of the finance ministry. We requested the officials to dispose of the assets that have been attached along with proper coordination among various probe agencies. We have also demanded a special court to hear NSEL matters and a dedicated designated authority with additional powers."

At a follow-up meeting on 16 June, investors met additional chief secretary (home) K.P. Bakshi and the joint commissioner of police in charge of EOW.

Investors have demanded assessment of the attached assets so that they can be correctly valued, identification of unencumbered assets and their notification in the state gazette. Legally, the assets can be sold only after a gazette notification. According to NAARA, out of the 6,000 crore attached assets, only 2,500 crore have been notified so far.

Investors have also asked for a special court to hear NSEL cases and for the appointment of a deputy collector—the competent authority in this case—who will sell the assets.

“The focus is only on recovery and we are not really thinking about arrests, cases, etc. We met many officials including bureaucrats, regulatory officials and police officers. We have requested them to reconcile the assets and at least proceed with the liquidation of those assets on which there is no lien," said Madhu Desai, one of the trustees of NAARA.

A meeting scheduled for Monday, which was to be attended by Somaiya, Bakshi, Forward Markets Commission (FMC) chairman Ramesh Abhishek, and officials of the Securities and Exchange Board of India, EOW and the finance ministry, was postponed as some officials were unavailable. The next date for the meeting was not decided.

“It cannot be lost sight of...that despite all good intentions which may be there, in nearly a year after favourable orders in MPID court ordering sale of assets of consenting defaulters, there has not been a single sale and thereby not a penny realized in the interest of investors," says a NAARA submission made to the chief minister and bureaucrats.

MPID refers to the Maharashtra Protection of Interests of Depositors (MPID) Act, under which EOW has charged all the accused entities. Mint has a copy of the submission.

Investors say a dedicated court is required since some of the orders related to sale of properties have been challenged in various courts across the country and EOW or FMC will find it difficult to file appeals in different courts.

When the NSEL scam surfaced on 31 July 2013, the exchange suspended trading in all but its e-series contracts. These, too, were suspended a week later. It proposed a payment plan for 14 August 2013, but it was unable to make a single successful payout.

NSEL is believed to have suspended the contracts after an instruction from the consumer affairs ministry 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. Representatives of NSEL and Financial Technologies (India) Ltd, which holds 99.99% in NSEL, did not respond to queries emailed on Monday.

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