The investor has alleged non-payment of instalments where Mohan India and its associates were to pay `120 crore by 30 January but have paid only `23.95 crore
Mumbai: One of the aggrieved investors of crisis-hit National Spot Exchange Ltd (NSEL), Pankaj Saraf, has filed a complaint with Mumbai police’s Economic Offences Wing (EOW) against the commodities bourse and one of its prominent borrowers, Mohan India group, alleging non-payment of instalments.
NSEL is engulfed in a ₹ 5,574.35 crore payment crisis that emerged on 31 July.
In a copy of the complaint reviewed by Mint, Saraf alleged that Mohan India and its associates were to pay ₹ 120 crore by 30 January, but have paid only ₹ 23.95 crore.
An agreement to this effect was signed between borrower Mohan India and its associates with NSEL at the instance of the EOW on 30 October. This agreement was approved by the Maharashtra Protection of Interest of Depositors (MPID) court.
Saraf also complained that the EOW had in good faith released sugar stock valued by the borrower at around ₹ 20 crore on condition that the proceeds will be deposited in NSEL’s escrow account for distribution to investors. Mohan India, however, deposited only ₹ 12.95 crore, claiming that the sugar was of inferior quality.
The settlement crisis at NSEL came to light on 31 July 2013, when the exchange abruptly suspended trading in all but its e-series contracts, which were suspended a week later. The closure of trading may have been prompted by an instruction from the consumer affairs ministry 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 weren’t 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 of 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.
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