Home >Market >Stock-market-news >EOW moves to seize properties of NSEL borrowers

Mumbai: The economic offences wing (EOW) of Mumbai police on Thursday moved to seize the properties of ARK Imports Pvt. Ltd in connection with the 5,574.35 crore payment crisis at the National Spot Exchange Ltd (NSEL).

ARK Imports, one of the top borrowers of NSEL, owes 719.50 crore to the commodities exchange.

This is the first attachment order in the NSEL case and the investigating agency is “confident" that the value of the properties attached will be sufficient for recovering investors’ money.

“We have started attaching the properties of NSEL borrowers who have defaulted," a top EOW officer said. “We have issued orders relating to at least 25 properties of the borrowers."

The same person added the process of seizure will take at least 15 days.

Meanwhile, the EOW probe has revealed that some of the borrower companies have remitted money outside the country.

“The books of accounts of a few companies show that money has been remitted overseas. We are sharing this information with the enforcement directorate for further probe," the EOW officer said, asking not to be identified.

On Thursday, the agency said that NSEL’s former chairman Shankarlal Guru, who resigned from his post on 19 August, did not appear before it citing health reasons. Guru has been summoned by the EOW for questioning.

Guru’s son-in-law Nilesh Patel is the managing director of NK Proteins Ltd, which owes about 970 crore to NSEL. He is in police custody.

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.

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