NSEL files criminal case against Maharashtra govt
National Spot Exchange Ltd (NSEL) has blamed the Maharashtra government for not taking action against brokers and trading members in the NSEL scam
Mumbai: Five years after the ₹5,574-crore NSEL scam came to light, National Spot Exchange Ltd on 29 November filed a criminal writ petition before the Bombay high court, blaming the Maharashtra government for not taking action against the brokers and trading members, or attaching their assets. The court has also issued a notice to the state government asking it to seize the assets of the accused brokers. The matter will be next heard when the court reopens in January.
“NSEL has filed a writ petition in Hon'ble Bombay High Court, praying for directions to the government of Maharashtra to attach the properties of member-brokers. Vide order dated 21.12.2018, the Hon'ble high court has issued a notice in the matter. As the matter is sub judice, we are unable to comment any further,” said an NSEL spokesperson in an emailed response.
Now, the Economic Offences Wing (EOW) of the Mumbai police is expected to attach the assets of the accused brokers.
The move comes after a division bench in October observed that there was “no justification for the respondents (Maharashtra government) for not attaching the properties of the brokers”.
In the petition, the exchange argued that despite the filing of two cases against more than 300 brokers/members, holding them culpable in the scam, their assets have not been attached yet. It also alleged that the government was acting in a biased manner. A copy of the petition has been reviewed by Mint.
“The government is acting in a partial manner, singling out, targeting and discriminating the petitioner (NSEL) by taking action only against the petitioner and the parent company, (63 Moons Technologies Ltd) and favouring non-defaulting members of the exchange,” it said.
Non-defaulting members are brokers who acted as intermediaries between investors and the exchange in the settlement crisis.
The scam erupted in July 2013 when the exchange defaulted on a ₹5,574 crore payout. NSEL is 99.99% owned by 63 Moons, formerly Financial Technologies India Ltd (FTIL).
So far, the EOW has attached nearly ₹8,000 crore worth of assets, including assets of ₹2,000 crore seized on 20 July 2016, besides assets of ₹5,200 crore of suspected defaulters Mohan India Pvt. Ltd, Loil Group firms, N.K. Proteins, PD Agroprocessors Pvt. Ltd and Tavishi Enterprises Pvt. Ltd, among others, in 2014. The attachments do not include seizures by other investigative agencies.
NSEL argued that assets of only one trading member—Indian Bullion Market Association (IBMA), a fully owned subsidiary of NSEL—have been attached so far. This, despite the fact that the member/brokers were named as accused in FIRs in September 2013 and September 2018, it added.
In 2015, EOW had arrested officials of Anand Rathi Commodities Ltd, Geofin Comtrade Ltd and India Infoline Commodities Ltd on charges of mis-selling, mis-representing and cheating investors.
In 2016, the Securities and Exchange Board of India (Sebi) had issued show cause notices to five brokers in the NSEL scam for alleged violation of the code of conduct and mis-selling. The markets regulator had also cancelled their licences to trade in commodities. However, subsequently, these firms had transferred their commodity trading business to equity trading.
In September, 2018, Sebi had issued show cause notices to 300 brokers for violating provisions of the Forward Contracts Regulations Act (FCRA).
To be sure, the 300 brokers still have permission to trade in commodities from Sebi, but their licences can be revoked if the allegations of violations are proved. EOW had also registered a fresh case against the brokers following the Sebi action.
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