NSEL crisis: EOW to ask CBI to probe MMTC, regulator
2 min read 13 Dec 2013, 12:57 AM ISTEOW cannot probe role of the regulator Forward Markets Commission, MMTC as no FIR has been filed against them
Premium
Mumbai: The economic offences wing (EOW) of Mumbai police said it will ask the federal investigative agency to probe MMTC Ltd and the role of the Forward Markets Commission (FMC) in the ₹ 5,574.34 crore payment crisis at the National Spot Exchange Ltd (NSEL).
This is being done as EOW itself cannot probe the role of the regulator or MMTC as no first information report or FIR has been filed against them.
EOW will also seek a probe by the Central Bureau of Investigation (CBI) into the state-owned MMTC’s investment in NSEL, Himanshu Roy, joint commissioner of Mumbai police, said on Thursday.
“The CBI will likely investigate MMTC’s compliance with due diligence norms prior to investing money in NSEL," Roy said. In a related development, the Bombay high court on Thursday asked Jignesh Shah-led Financial Technologies (India) Ltd (FTIL) to inform MMTC in advance before selling their assets. It has asked Shah not to sell his holding in FTIL without informing MMTC in advance.
The Bombay high court was hearing a plea by MMTC seeking to recover ₹ 268 crore from NSEL and its promoters. FTIL holds 99.99% in NSEL.
Meanwhile, a Mumbai court on Thursday extended the judicial custody of Anjani Sinha, former managing director and chief executive officer of NSEL till 17 December. Sinha was arrested by the EOW on 17 October in connection with the payment crisis at the commodity spot exchange.
The settlement crisis 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 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. 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.
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 ever since.
