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Mumbai: The Central Bureau of Investigation (CBI) on Thursday filed a case against the National Spot Exchange Ltd (NSEL) and its promoters under the Prevention of Corruption Act, alleging criminal conspiracy by it to cheat a public sector company, PEC Ltd.

The agency began searches in 15 locations, including the NSEL office in Mumbai, on Thursday morning in connection with the 5,574.34 crore payment crisis at the commodities exchange.

It also questioned Jignesh Shah, chairman of Financial Technologies India Ltd (FTIL), at his residence in connection with the case. FTIL holds a 99.98% stake in NSEL.

CBI has been conducting an enquiry in the NSEL case as the commodity spot exchange owes money to two state-owned companies—MMTC Ltd and PEC.

The agency said NSEL had floated fraudulent paired contracts for trading of agricultural commodities without actually undertaking any genuine trade, causing a loss of around 120 crore to PEC.

“We are conducting a search," CBI spokesperson Kanchan Prasad said. “However, I don’t have the details of the case right now."

CBI teams are searching eight residences—five of PEC officials, two of NSEL executives and one of a private counter-party—and seven offices that include six of the counter-parties involved in the PEC transactions and one NSEL office.

Four of these locations are in Mumbai, two in Karnal (Haryana) and nine in Delhi.

The counter-parties which were searched by CBI include Mohan India Pvt Ltd, PD Agroprocessors Pvt. Ltd, Vimladevi Agrotech Ltd, White Water Foods Pvt. Ltd and Ark Imports Pvt. Ltd, among others.

The investigative agency has recovered about 36 lakh from the residence of Anjani Sinha, former chief executive of NSEL, who is currently in judicial custody.

Ark Imports is the second largest borrower that owes 719.42 crore to NSEL.

Mohan India and PD Agroprocessors owe 575.08 crore and 644.55 crore, respectively.

Irregularities 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 asking the exchange 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 the 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 complete payout since.

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