Home / Market / Stock-market-news /  NSEL row: Top management of FTIL to be thoroughly investigated, says court

Mumbai: The top management of Financial Technologies (India) Ltd (FTIL), the parent of the crisis-ridden National Spot Exchange Ltd (NSEL), need to be more thoroughly investigated by the police, the Bombay high court said on Wednesday.

The court was hearing an anticipatory bail petition filed by Maneesh Pandey, a subordinate of Amit Mukherjee, former assistant vice-president of business development of NSEL. Pandey’s anticipatory bail hearing has now been adjourned for two weeks. He will, however, have to present himself before the economic offences wing (EOW) of Mumbai police. Mukherjee was arrested on 9 October.

“Judge Sadhna Jadhav has directed EOW to target the top management in the NSEL scam instead of the mid-level employees of the spot exchange," said Ketan Shah, an aggrieved investor of NSEL, which is facing a 5,574.35 crore payment crisis.

In a related development, a Mumbai court on Wednesday rejected the bail plea of Nilesh Patel, managing director of NK Proteins Ltd, one of the biggest defaulters of NSEL. NK Proteins owes about 964 crore to NSEL. Patel, who was arrested by the EOW on 22 October, is the son-in-law of NSEL’s former chairman Shankarlal Guru, who resigned his post on 19 August.

The crisis at NSEL came to light on 31 July when the exchange abruptly suspended trading in all but its e-series contracts. The e-series contracts 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.

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 had proposed a payout plan, but it has been unable to stick to the schedule.

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