NSEL scam: Maharashtra govt starts auction of seized assets

Mumbai: The Maharashtra government has hired real estate advisory company HDFC Realty Ltd to value and auction assets seized by the Mumbai police’s economic offences wing (EOW) in connection with the National Spot Exchange Ltd (NSEL) payments crisis.

A 19 May notice on the Maharashtra government’s website said the state has invoked its powers under the Maharashtra Protection of Interests of Depositors Act (MPID) to pass this order.

It is necessary “that a fair and accurate valuation of the assets and properties thus confiscated is carried out before these are auctioned,” said the government order in Marathi.

In the four years since the NSEL scam came to light, EOW has seized assets worth Rs7,200 crore belonging to brokers who had defaulted on their obligations as well as the spot exchange.

In 2014, the MPID special court passed an order that such a valuation report would have to be first submitted to an additional collector and two assistant commissioner of police (ACP) ranking officials who would in turn make a recommendation to the MPID special court for auction of the assets at the valuation determined by the real estate consulting company.

The Rs5,574.35 crore payments scam at NSEL, which was 99.9% owned by Financial Technologies (India) Ltd (now, 63 Moons Technologies Ltd) came to light when trading was halted on the commodities bourse following a directive 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 had been doing that.

HDFC Realty did not respond to an email seeking comment.

“The matter is sub judice and (we) would not like to make an elaborate comment. However, justice requires that only defaulters’ assets are liquidated and a refund is made to trading clients,” said Prakash Chaturvedi, chief executive officer, NSEL.

In any case, even after assets are auctioned, the road to refund investors would not be easy as the Serious Fraud and Investigation Office (SFIO) is yet to complete its report verifying investor claims.

The SFIO is examining the investor refund claims for alleged irregularities, brokers’ role in the crisis and has sent a detailed questionnaire seeking details of investments. Mint has seen a copy of the notice sent to investors that seeks balance sheet details, compliance with payment of Value Added Tax (VAT) etc.

In October, the ministry of corporate affairs empowered the SFIO to examine the affairs of NSEL for allegations of fraud under the Companies Act 2013. SFIO is expected to submit its report to the government in July and can thereafter launch a prosecution in courts and National Company Law Tribunal (NCLT).

Parallel to the SFIO investigation, a high court appointed committee has been able to analyse 11,000 investor claims so far and submitted its report to the high court. The Bombay high court in a 13 April order asked the committee to speed up the fact finding exercise and adopt a more ‘granular’ approach.

Abhiram Ghadiyalpatil contributed to the story.