'NSEL, board violated rules; failed to act against defaulters'

 
The corporate affairs ministry has found that the beleaguered National Spot Exchange (NSEL) and its Board not only violated multiple regulations but did not take action against repeated defaults which resulted in Rs  5,600- crore scam at the bourse.

According to PTI, the Registrar of Companies (RoC), Mumbai, has concluded that NSEL breached as many as 15 provisions of the Companies Act, including those related to corporate governance, sources said. The spot commodity exchange never declared any member as defaulter despite repeated instances of defaults, which is also one of the main reasons for the present crisis, sources added. Many of the defaulters were also allowed to trade and increase their exposure.

NSEL, part of Jignesh Shah-led Financial Technologies Group (FTIL), is grappling with the crisis after it suspended trade on July 31 on government direction. It has already seen major fallouts with rejig of Boards at the exchange as well as at some other Group companies.

Besides finding corporate governance failures, including lack of transparency, integrity and compliance, sources said that the bourse did not have as many as nine committees. These panels are required under regulations.

Among others, the exchange did not set up vigilance, dispute resolution, trading, clearing and arbitration panels. There have meetings and it has been found that the Board did not discuss the exchange's compliance with various rules such as those related to admission of new members, sources said.

Flagging various concerns, the inspection found that the exchange did not have a mechanism for verification of physical stock at the warehouses. As per the findings, many NSEL directors, including Shah and Joseph Massey, were holding common directorship in Group companies of FTIL and they cannot claim to be not aware about happenings at the exchange.

The inspection of books was ordered under Section 209 A of the Companies Act.

Non-executive chairman ShankarlaI Guru and two non- executive directors Ramanathan Devarajan and B D Pawar have also quit from NSEL Board.

NSEL scam: NK Proteins MD Nilesh Patel held

 
Managing Director of NK Proteins Ltd, one of the biggest defaulters of the beleaguered National Spot Exchange Ltd (NSEL), was on Tuesday arrested in connection with the bourse's Rs 5,600 crore scam, taking the total number of arrests in the case to four.

"NK Proteins' MD Nilesh Patel was on Tuesday arrested in connection with NSEL case," Additional Police Commissioner (EOW) Rajvardhan Sinha said.

NK Proteins was the first company that had borrowed Rs 350 crore from the NSEL, said another police officer adding that "now the company owes the spot exchange about Rs 850 crore to Rs 900 crore that includes the principal amount of Rs 350 crore, interest as well as other payable amount."

"Patel knew that its company would not be in a position to pay back money but still he borrowed Rs 350 crore from the spot exchange, knowing the fact that NSEL cannot lend money.

Hence, Patel, in connivance with the NSEL officials misused the investors' amount," the official added.

The company has also used the amount to expand its edible oil business and also entered into a joint venture with Adani group, the officer alleged, adding "hence the books of accounts of the joint venture have also come under scanner and investigators would surely examine the books."

NK Group and the Adani Group's agro trading arm, Adani Wilmar Ltd, had formed a 50:50 joint venture called AWN Agro Pvt Ltd, which became the largest castor oil exporting entity in India.

The EOW officials earlier arrested three accused in the case. Anjani Sinha, former head of the beleaguered bourse, was held on October 17, Amit Mukherjee, an ex-assistant vice-president of NSEL was nabbed on October 9 and the next day Jay Bahukhundi, another ex-assistant vice-president and in-charge of KYC department, was apprehended.

An FIR was registered in the case on September 30 by the EOW against the directors, including Jignesh Shah and Joseph Massey, promoters and defaulters.

All of them have been charged with cheating, forgery, breach of trust and criminal conspiracy and other offences under the Indian Penal Code. On October 1, CBI too registered a preliminary inquiry into the case.

NSEL has been facing problems in settling Rs 5,600 crore dues of 148 members/brokers, representing 13,000 investor-clients after it suspended trade on July 31 on government's direction.

EOW likely to defreeze NSEL escrow account on Thursday

The economic offence wing (EOW) of Mumbai Police is likely to defreeze an escrow account of National Spot Exchange Ltd (NSEL) by Thursday morning. NSEL's escrow account was among those 58 bank accounts which was frozen by EOW on Tuesday, to investigate Rs.5,500 crore NSEL payout crisis.

Crisis-ridden NSEL had opened an escrow account after direction by the government to ensure payouts on priority to about 8,000 small investors stuck after the exchange halted trading. But on Tuesday, NSEL failed its payout seventh time in a row - giving a reason that EOW had frozen its settlement and escrow accounts, both.

In an email statement, NSEL had said, "Due to freezing of bank accounts, NSEL is unable to make any payouts on Tuesday. NSEL has informed the FMC of this development. NSEL is taking legal advices to defreeze the settlement bank accounts. Investors and members will be notified in due course."

Talking exclusively to Headlines Today, senior EOW official admitted, "It was our mistake to freeze escrow account on Tuesday. At that point of time, when all 58 bank accounts were getting freezed, we were unaware which are escrow account and which are settlement accounts." But he assured,"

For the benefit of investors, we would defreeze the escrow account at the earliest. Wednesday is public holiday, therefore, on Thursday we would communicate to the bank and will ensure NSEL's escrow account gets defreezed soon."

Interestingly, as of now, NSEL's escrow account has only Rs.18 crore. That means - payout failure was quite imminent. NSEL was supposed to make a scheduled payment of Rs.174.72 crore to investors on Tuesday.

According to settlement plan, NSEL would pay Rs.3,494.4 crore this year in installments of Rs.174.72 crore every Tuesday. The exchange has defaulted on payouts for the past six weeks and has settled about Rs.150 crore so far.

EOW has frozen total 58 bank accounts of promoters of FTIL and NSEL - which also includes personal accounts of Jignesh Shah, Anjani Sinha, Joseph Massey, Shantilal Guru, B D Pawar, Amit Mukherjee, M C Pandey, Shrikant Jawalgekar, Neerav Pandey, NSEL's auditor Mukesh Shah and others.

Read more at: http://indiatoday.intoday.in/story/eow-likely-to-defreeze-nsel-escrow-account-on-thursday/1/312804.html