Home >Politics >Policy >NSEL case: HC panel calls for audit of investor claims

A Bombay high court committee set up to refund investors of the National Spot Exchange Ltd (NSEL) has ordered an audit of the records of the exchange, its investors and trading members, after it came across discrepancies in the figures submitted by them.

The committee, formed to refund the 13,000 NSEL investors, called for the audit in an interim order dated 31 March.

“The committee by this interim order finds it necessary to carry out audit of the (above) investors, their trading members and that of NSEL who shall make available all relevant records in relation to the transaction done by them on the platform," said the order from the committee headed by justice V.C. Daga, a copy of which has been reviewed by Mint.

The committee directed the auditing the books of accounts, bank accounts and income tax returns of investors, besides documents of the exchange. Brokers who sold NSEL products will also be audited.

The committee will soon send its report and the audit recommendations to the high court for approval.

Trading on NSEL was halted in July 2013 after a settlement crisis at the commodities bourse, which is 99.99% owned by Jignesh Shah-led Financial Technologies Ltd (FTIL).

The Bombay high court on 24 April 2014 formed a three-member committee to recover money in the 5,574.35 crore fraud.

In February this year, the ministry of corporate affairs ordered the merger of FTIL and NSEL.

The panel, which includes solicitor member J.S. Solomon and chartered accountant Yogesh Thar, as well as retired justice Daga, has powers to pass a decree against defaulting borrowers.

The committee, which had invited claims from NSEL’s 13,000 investors, is not in a position to disburse 30 crore funds recovered from the sale of assets and bail bonds, due to conflicting data from NSEL, brokers and investors.

“The committee, while processing the claims received from various investors, noticed large scale discrepancies between the claim set up by the investors vis-à-vis the data submitted by NSEL. Even the discrepancies in Permanent Account Number (PAN) were noticed," stated the interim order.

Such discrepancies were observed in a 15 instances with respect to eight brokers.

According to the panel’s interim order, there have been allegations against brokers—such as giving false assurances, misrepresentation, trading without clients’ authority, modification of client code and selling NSEL contracts as investment vehicles.

To be sure, the high court committee’s interim order stated that brokers and investors have no reservations in submitting data and information for verification of investor claims.

Even as the NSEL crisis nears its third anniversary, the parties involved have not been able to agree upon the claims and the committee is still working with data riddled with anomalies.

“If a committee finds discrepancies, then they should have approached the Bombay High Court for an audit earlier on. It is almost two years since the committee was formed. An audit at this stage would delay the process of refund to investors and conclusive action," said Amarjit Chopra, former president of the Institute of Charter Accountants of India.

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