Home / Market / Stock-market-news /  NSEL case: Mumbai police questions 4 brokerages

Mumbai: The economic offences wing (EOW) of Mumbai police on Wednesday said it has questioned four brokerages in connection with the National Spot Exchange Ltd (NSEL) settlement crisis.

The four brokerages are India Infoline Ltd, Anandrathi Commodities Ltd, Geojit Comtrade and Systematix Commodities Services Pvt. Ltd.

The EOW is probing the exposure of brokerages at NSEL, the manner in which they promoted investments in products offered by the spot exchange and loan disbursed to investors.

The EOW will also question the promoters of the brokerages, in this regard.

The agency has also interrogated Rajesh Todi of Swastik Overseas Corp. Ltd, which owes 102 crore to NSEL, according to Rajvardhan Sinha, additional commissioner of EOW. Incidently, Todi earlier used to work with NK Protiens Ltd, one of the biggest defaulter of NSEL. “Todi has made cash payment and bought huge land parcels in Gujarat in benaami names of farmers," said Sinha.

Meanwhile, Hyderabad-based NCS Sugars Ltd, a borrower that owes 58.85 crore to NSEL, signed a settlement agreement with the exchange for 50 crore.

“The payment schedule agreed upon is for one year. For six months, the company pays 2 crore per month, for a month 6.15 crore, and the next five months 6.17 crore," NSEL said in a statement. NCS Sugars had paid 1 crore earlier.

According to the agreement, NCS Sugars has offered a collateral in the form of 525,000 shares of NCS Industries Pvt. Ltd as well as properties of around 102 crore. They have also offered NSEL the right to appoint a nominee director on the board of the company.

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. Seperately, Vasant Dhoble, who led a crackdown across Mumbai’s bars in 2012, has been appointed as deputy commissioner of the EOW and will be working with additional commissioner Sinha on the NSEL case.

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