Police say focus of investigation in NSEL case is to find the money trail
Mumbai: The Mumbai police’s economic offences wing (EOW) on Tuesday seized the assets of Jignesh Shah, chairman and managing director of Financial Technologies (India) Ltd (FTIL), and other directors on the board of FTIL-controlled National Spot Exchange Ltd (NSEL) in connection with the ₹ 5,574.35 crore payment crisis at the commodity spot exchange.
The move is yet another indication that the investigation is getting closer to Shah, who has tried to distance himself from events at the exchange, which is 99.99% owned by FTIL.
Rajvardhan Sinha, additional commissioner of EOW, announced the seizure of assets of the directors in the NSEL case.
“We are trying to unravel the multiple layers of the books of accounts of NSEL. The focus of the investigation is to find the money trail," Sinha said.
All these executives resigned in the wake of the payment crisis at the commodity spot exchange that surfaced at the end of July.
The EOW has seized 119,000 shares in FTIL owned by Shah worth ₹ 1.78 crore, two flats including one in Juhu in the western suburbs of Mumbai, a plot of land worth ₹ 1.6 crore in Pune, and fixed deposits worth ₹ 11.75 crore.
The investigative agency has also frozen five demat accounts of Shah and ₹ 51 lakh worth of shares owned by him in Indian Energy Exchange Ltd, a subsidiary of FTIL.
The agency has attached two properties of Massey in Mumbai and shares worth ₹ 98 lakh owned by him in MCX.
It has attached four flats of Javalgekar in Mumbai and shares worth ₹ 1.2 crore, and an Ahmedabad bungalow of Guru, among other assets.
So far, EOW has attached at least 206 properties of defaulting borrowers of NSEL worth ₹ 2,579 crore. The agency has recovered at least ₹ 170.97 crore from 322 bank accounts that have been frozen in connection with the NSEL crisis.
“So far the total amount of assets attached by us is ₹ 2,985.90 crore. We are confident of recovering 90% of the total amount involved in the NSEL crisis," said Sinha.
EOW has arrested at least five top executives from both NSEL and the borrowers.
“The EOW action was long overdue and it is a good decision by the investigative agency. We are going to meet the joint commissioner of police on Wednesday," said Ketan Shah, an NSEL investor.
“It is the beginning of the end of Jignesh Shah. Within 10-15 days we will also have more updates on his ‘fit and proper’ status. We are optimistic our money will be recovered," said Arun Dalmia, another investor in NSEL.
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.
FTIL stock closed at ₹ 165.90 on the BSE on Tuesday, losing 0.18%. It has lost 94.5% of market value since it hit a high of ₹ 3,016.50 in June 2007.
MCX stock lost 2.5% to close at ₹ 457.55. From its high of ₹ 1,594.40 in November 2012, MCX has lost 71.3%.
Shah and his family hold about a 45% stake in FTIL, which owns 26% of MCX.
Ami Shah contributed to this story.
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Never miss a story! Stay connected and informed with Mint.
our App Now!!