Home / Market / Stock-market-news /  NSEL case: Bails of Anjani Sinha, two others rejected

Mumbai: A Mumbai court on Tuesday rejected bail for Anjani Sinha, former chief executive of National Spot Exchange Ltd (NSEL), and two others in connection with the 5,574.34-crore payment crisis at the commodity bourse.

Sinha was arrested on 17 October by Mumbai Police’s economic offences wing (EOW) in connection with the payments crisis, after arrests of Jai Bahukhandi and Amit Mukherjee.

Bahukhandi was a former assistant vice-president of warehousing at NSEL and Mukherjee a former assistant vice-president of business development.

NSEL is a subsidiary of Financial Technologies (India) Ltd (FTIL).

In a separate development, capital market regulator Securities and Exchange Board of India (Sebi) adjourned hearing a case on whether FTIL is fit to run an exchange, pending Bombay High Court’s decision in the matter. Commodities market regulator Forward Markets Commission (FMC) had in an order on 17 December declared that FTIL was unfit to run an exchange.

The high court will hear FTIL’s petition against FMC’s order by the end of this month, and Sebi will hear FTIL in the first week of March.

Irregularities 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 asking the exchange 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 the 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 since.

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